“Showa” Style Business Practices

January 2013 Business Hint from Cairo, Egypt “Showa” style business practices Japanese companies are performing well in Egypt despite the ongoing political unrest. All have adopted the good old traditional sales techniques; the “Showa”* style business practices which were common during the Japanese post-war economic miracle era. This suggests the key to succeed in this part of the world. The key to success is “Showa” Toyota Motor Corporation entered the markets of the Western world in the Showa era. Toyota built up its business in the United States and Europe through one-on-one interaction with its target customers, and it is just such business practices that are called for in the Egyptian market. In June 2011, Toyota established a joint venture corporation with an affiliated local vehicle distributor. They set a Japanese president to a new company and began producing the “Fortuner” SUV (sports utility vehicle) in Egypt. This luxury SUV is targeted for wealthy buyers. Toyota decided not to modify its brand image, and marketed the Fortuner to high-end consumers with its cultivated business practices. Today, Toyota has a 24-percent share of the Egyptian SUV market and has beaten out other competitors. Its great strength is the production system which understands the local market needs and responds to them. Toshiba Corporation has made a full-scale entry into the Egyptian market where it produces and sells liquid crystal display televisions (LCD TV). South Korean manufacturers hold the dominant position in the global LCD TV market and home appliance showrooms in Egypt’s shopping malls would appear to be awash with Korean brands, but the truth is somewhat different. Toshiba has a 25-percent share of the LCD TV market in Egypt putting it ahead of the two leading South Korean brands (LG has a 20% share and Samsung 15%). What lies behind Toshiba’s success in this market? One crucial factor is its selling strategies: Toshiba primarily targets middle-income households, marketing its 42-inch TVs to middle-income and wealthy buyers, with a 24-inch product for middle- and low-income households, Egypt’s so-called volume zone. This strategy of placing products that are tailored to the needs of specific segments of the market has been a resounding success here. Another factor is Toshiba’s long-standing experience in distribution channel management. Today, electronics retail stores are the mainstream distribution channel in Japan, but Toshiba has spent 1 many years developing “local electrical appliance shops,” which were the mainstream in the Showa era—in other words, a distribution network comprising manufacturer-affiliated stores. This channel is essential in delivering personalized services, with one-to-one personal touch that is so important to capturing potential customers. This distribution network generates roughly 70 percent of Toshiba’s gross income from sales and these “Showa” style business practices are helping Toshiba to get on top of the fierce competition with its South Korean rivals here in Egypt. Ajinomoto Co., Inc.—the leading manufacturer of the fifth basic taste “umami seasonings” or glutamate which is a common amino acid found abundantly in nature.—is using a foothold in the market for low-income consumers as a springboard to achieving deeper market penetration for its products among middle-income families. Japanese representatives and Egyptian employees visit vendors in the popular street markets and retail stores to pitch products that retail at 25 piaster per bag (approx. ¥3) in a step-by-step fashion. Ajinomoto representatives greet shop owners with a handshake saying “As-salamu alaykum! Al-yaban! (=Japan!) Ajinomoto!,” putting “Japan” ahead of the brand name in order to make shop owners aware that Ajinomoto is a Japanese brand; a sales technique that the company has been setting high store on since the Showa era. Advertising posters steeped in the atmosphere of the Showa period have also proved hugely popular with Egyptian consumers. These posters, which feature photographs of the hands of local administrative staff sprinkling umami seasoning over a bowl of mixed rice that’s been prepared in the Ajinomoto offices, have a homemade warmth to them. Ajinomoto reports that sales are on the upswing; so much so that product stocks are running short. The company has unveiled plans to build a Ajinomoto sales reps at work packaging plant in Egypt with a view to further augmenting sales of its products. Unicharm Corporation, aiming to become the market leader in the daily commodity, meanwhile, is building a new manufacturing plant in Egypt, where it primarily markets disposable diapers. Unicharm was planning to host an opening ceremony in mid-December 2012 to mark the completion of the new plant, which covers an area of approximately 60 thousand square meters. Western manufacturers hold the dominant position in Egypt’s disposable diaper market, but Unicharm has narrowed down its targeted market to middle- and low-income consumers. Its products are prominently displayed at both mass-market retailers and smaller community-based stores. It is interesting to see how much of the market Unicharm can capture from its Western rivals in the months and years ahead. 2 Japan was a vibrant and dynamic country during the years of the Showa era when business was primarily conducted through face-to-face interaction between companies and customers. Japanese companies seeking to tap into the emerging Egyptian market seem to be looking to these “Showa” style selling techniques as a means of ensuring their success. *Note: The Showa Era covers the period of Japanese history spanning 1926 to 1989, though this article is written specifically with the period covering the mid-1950s through the mid-1970s—Japan’s so-called Golden Age of unparalleled economic success in mind. During these years, Japan’s economy grew at an astounding rate thanks to the hard work and persistent effort of ordinary citizens. Junichi Takamiya Managing Director, JETRO Cairo 3 .

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