A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Joffe, Hilda Article Japanese Business Models for Electronic Commerce: Laying the Foundation of a Ubiquitous Networking Infrastructure with Mobile Phones and Convenience Stores Vierteljahrshefte zur Wirtschaftsforschung Provided in Cooperation with: German Institute for Economic Research (DIW Berlin) Suggested Citation: Joffe, Hilda (2001) : Japanese Business Models for Electronic Commerce: Laying the Foundation of a Ubiquitous Networking Infrastructure with Mobile Phones and Convenience Stores, Vierteljahrshefte zur Wirtschaftsforschung, ISSN 1861-1559, Duncker & Humblot, Berlin, Vol. 70, Iss. 4, pp. 546-570, http://dx.doi.org/10.3790/vjh.70.4.546 This Version is available at: http://hdl.handle.net/10419/99235 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu Vierteljahrshefte zur Wirtschaftsforschung 70. Jahrgang, Heft 4/2001, S. 546–570 Japanese Business Models for Electronic Commerce — Laying the Foundation of a Ubiquitous Networking Infrastructure with Mobile Phones and Convenience Stores By Hilda Joffe* Summary The last decade has been marked by U.S. leadership on the Internet market. Consequently, in most parts of the world Internet access and usage is PC-centred. This is not the case in Japan, where Internet usage and electronic commerce in business-to-consumer markets is mainly promoted by mobile phones and con- venience stores. Japanese e-commerce models are products of the regional urban structure and lifestyles. Distinct features of Japan’s urban areas favouring the use of mobile Internet are traffic jams and long com- muting times. They explain why entertainment services are the most popular among mobile Internet con- tents, since they seem to be most suitable to bridge waiting time in an entertaining way. Another typical feature of Japanese cities are the ubiquitous convenience stores. They have become focal points in the B2C e-commerce, serving as payment and distribution centres, as well as Internet access points through multimedia terminals. Japanese e-commerce models are about to expand to other Southeast Asian coun- tries, where urban structures are similar to those in Japan. One has to conclude that e-commerce in differ- ent countries is developing in various ways, according to local culture and habits. Hence, promoting global e-commerce involves the necessity of understanding and respecting local and regional culture and customs. 1. Japan’s Old Economy in Transition video game machines, digital TVs, multimedia kiosks, car navigation systems etc. These systems will soon be linked In a joint study about Japan’s state of e-commerce re- through optical fiber communications networks that will leased in the beginning of this year, the Ministry of Econo- provide most of Japan’s households with high-speed, high my, Trade and Industry (METI), the Promotion Council for volume Internet access (Hamajô, 2000, 66; Matsuyama, Electronic Commerce (ECOM) and the business consult- 2000, 69; Iwasaki, 2000, 84). ing company “Accenture” point at Japan’s slowness in tak- Japan’s emerging info-communication- and e-com- ing on the Internet. According to their estimations, in merce infrastructure foreshadows revolutionary changes terms of Internet usage Japan is lagging at least two years in post-war economic structures, comparable in their sig- behind the US. However, when it comes to ubiquitous net- nificance to historic changes initiated by the Meiji Resto- working it is conceivable that the US and Europe might be ration and the Occupation reforms enacted following trailing behind Japan. World War II. During these previous reforms political and The term “ubiquitous” here means access to the Inter- economic leadership was restricted from above, the “IT net that is available “everywhere and all the time”, i.e. Revolution” admits power restrictions from below. This be- access that has moved beyond the PC. In contrast to the comes most evident in view of the recent Sogo Depart- US’s and Europe’s PC-centrism, in Japan “ubiquitous access” to the Internet is provided by cell phones and con- venience stores (C-stores). Both constitute the foundation * Bundesministerium für Wirtschaft und Technologie (BMWi) of Japan’s emerging networked information society. The (Federal Ministry of Economics and Technology), Scharnhorststr. 34–47, 10115 Berlin, Germany; e-mail: [email protected]. — info-communications network will operate through inter- The opinions and analyses in this paper reflect the viewpoints of connected information devices, such as cell phones, the author (and not of the BMWi). 546 ment Store case. After 150 years in business, the retailer have significant implications for the types of e-retail busi- collapsed in summer 2000 after Japanese citizens orga- ness that are emerging and trying to attract Japanese nized a spontaneous boycott over the Internet. Forced by consumers. As the economy is loosening keiretsu ties,1 public pressure the government abandoned its controver- competitive dynamics are breaking out and fuelling the sial plan of financing the failed retail chain with tax money Japanese e-commerce market. (Mitchell, 2001). Long-term employment: The Japanese system of edu- A certain irony of the Sogo Department Store case lies in cation and employment puts the country at a disadvan- the fact that traditionally powerful politicians, bureaucrats tage in fostering entrepreneurship. The Japanese bureau- and businessmen could not assert their interests against cracy copied the education system from the Nazi Volk- housewives, who were traditionally positioned low in the shochschule system in the 1940s. This system sup- Japanese relationship hierarchy. Hence, one can say that pressed thought, initiative and individuality and required the Internet has restructured the traditional relationship net- above all obedience and conformity. Emphasizing memo- work behind Japan’s economy, where the granting of loans, rization and group orientation, Japanese schools and uni- subsidies, licenses etc. to date has often depended on per- versities are often criticized for graduating people who sonal relationships. At the same time, in certain fields, the lack critical thinking, creativity and personal flexibility, all Internet has also accelerated the erosion of central pillars of which are distinctive features of entrepreneurs. Japan’s of Japan’s post-war economic structures. This erosion employment system shows many of the same deficits. becomes most evident in the following areas: Long-term employment was implemented after World War Administrative guidance (gyôsei shidô): The term “gyôsei II, when a severe shortage of skilled labour enabled work- shidô” characterizes a principal instrument of enforcement ers to shift easily to higher paying companies. Employers used by Japanese ministries to give unofficial instructions solved the problem of high labour fluctuation by hiring to the industries they regulate. Hence, there are no official unskilled workers, training them and binding them to the penalties in the case of non-compliance, but public officials company through seniority-based salaries. Whereas the can withhold finance or tax concessions, government con- first choice of graduates from top U.S. universities is to set tracts, import permits, approval of cartel arrangements, etc. up their own businesses, Japanese top university gradu- Used in the post-war period to stimulate the development ates aim at being employed in large corporations or gov- of the Japanese economy, the government does not intend ernment bureaus (Sakaiya, 1999). to apply gyôsei shidô for the stimulation of the e-commerce SMEs could not guarantee lifetime employment and sector. The government has declared that it will leave the therefore used to have the reputation of being weak (SME leadership of promoting e-commerce to the private sector Agency, Japan, 2000). Imbuing the mentality of working and confines itself to the creation of a conducive environ- for only one organization over a long period certainly does ment in this area (Kantei, 2000). not foster the adventurous spirit needed to start up one’s Multi-layered distribution system: Distribution channels own company. Due to its education and employment sys- in Japan are longer than in many other countries, result- tem, Japan suffers a dearth of experienced, flexible man- ing in higher consumer prices. Moreover, it has been com- agers for fast changing