There are number of things that Japanese firms do extremely well. One is carefully train their people, a strategy that many successful American firms also employ. Another is to try and remain on the technological cutting edge. A third, an increasingly important because of it uniqueness to the Japanese, is to keep a keen focus on developing and bringing to market goods that are competitively priced.
In contrast to Western firms, many Japanese companies use what is called a target cost approach. Like another multinational firms, Japanese companies begin the new product development process by conducting marketing research and examining the characteristics of the product to be produced. However, at this point the Japanese take a different approach.
The traditional approach used by multinational companies around the world is to next go into designing, engineering, and supplier pricing, and then determine if the cost is sufficiently competitive to move ahead with the manufacturing.
Japanese manufacturers, on the other hand, first determine the price that the consumer most likely to accept, and then they wok with design engineering and supply people to ensure that the product can be produced at this price. The other major difference is that after most firms manufacture a product, they will engage in periodic cost reductions. The Japanese, however, use a kaizen approach, in which thee are continuous cost reduction efforts.
The critical difference between two systems is that the Japanese get cost out of the product during the planning and design stage. Additionally, they look at profit in terms of product lines rather than just individual goods. So a costumer product that would be rejected for production by an American or European firm because its projected profitability is too low may be accepted by a Japanese firm because the product will attract additional costumers to other offerings in the line.
A good example is provided by Sony, which decided to build a smaller version of its compact personal stereo system and market it to older consumers. Sony knew that the profitability of the unit would not be as high as usual, but it went ahead because the product would provide another market niche for the firm and strengthen its reputation.
Also a side benefit is that, once a product is out there, it may appeal to an unanticipated market. This was the case with Sony's compact personal stereo system; the unit caught on with young people and Sony's sales are 50 percent greater than anticipated. Had Sony made its manufacturing decision solely on stand alone profitability, the unit would never have been produced.
These approaches are not unique to Japanese firms. Foreign companies operating in Japan are catching on and use them as well. A good example is Coca-Cola Japan. Coke is the leading company in the Japanese soft drink market, which sees the introduction of more than a thousand new products each year.
Most of these offerings do not last very long, and cost accountant might well argue that is not worth the effort to produce them. However, Coca-Cola introduces one new product a month. Most of these sodas, soft drinks, and cold coffees survive less than 90 days, but Coke does not let the short term bottom line dictate the decision. The firm goes beyond quick profitability and look t the overall picture.
Result: Coca-Cola continues to be the leading soft drink firm in Japan, despite competition that is often vigorous than in the United States.
