For foreign companies in Japan, adapting to local culture seen as key to success

Top brands have mixed records in tough market

by

Staff Writer

Adjusting to culture in Japan is often a challenge for foreign residents. The same goes for foreign companies.

Some global retailers have entered the Japanese market and established themselves as beloved brands by adapting to the local culture, while others struggle to win the hearts and minds of discerning customers.

“Many international brands in various sectors have come to the Japanese market. And, as competition heats up, customers’ expectations and demand for good services have gotten higher,” said Kenji Kaniya, a director of McDonald’s Japan’s PR department.

McDonald’s has tasted both sweet success and bitter setbacks in Japan. The U.S.-based hamburger chain in Japan opened its first outlet in Tokyo’s posh Ginza district in July 1971. Since then, the company has grown to become the country’s largest burger chain with nearly 2,900 stores as of August.

But during its 46-year history in Japan, the company had it share of trouble.

In 2014, McDonald’s made headlines after a supplier in China was found to have shipped expired meat used for chicken nuggets. And in 2015, the company sold food that reportedly contained foreign objects — not the least of which were human teeth found in an order of french fries.

The string of food safety scandals tarnished McDonald’s once-glowing image in the eyes of Japanese consumers.

The result was a ¥34.95 billion net loss in 2015, the largest loss since McDonald’s Holdings Co. (Japan) went public in 2001 in Japan.

Kaniya admitted that the company’s response during the time of crisis was “not sincere enough” to give customers peace of mind. “It is regrettable that we did not listen to our customers’ voice more closely,” he said at McDonald Japan’s headquarters in Tokyo. “I think we might have been arrogant at that time.”

After the scandals, McDonald’s Japan created a revitalization plan and tried to create a system to better respond to customers. The effort included the company’s Kodo smartphone app, which enables customers to post positive and negative feedback and receive a discount coupon for the effort, he said.

Thanks to its reconstructing, the company bounced back in 2016 by earning a ¥5.37 billion group net profit. It expects profit will grow further this business year to a record ¥20 billion through the end of December, it announced earlier this month.

The lesson learned from the scandals, Kaniya said, is to never stop listening to customers and to live up to their high standards.

“The needs of customers change constantly, and we need to continue to listen and evolve to follow up on their needs,” he said.

Starbucks is another foreign company that has gained enormous popularity in Japan. Starbucks opened an outlet in Tokyo’s Ginza district in August 1996 — making it not only the first Starbucks in Japan but also the first outside North America. Now with nearly 1,300 outlets in all 47 prefectures as of August, Starbucks’ brand has become virtually synonymous in Japan for fast-casual coffee shops.

The key to Starbucks’ long-term success in the country has been “respect for the culture of the local community,” said Norio Adachi, a director at Starbucks Coffee Japan Ltd.’s corporate affairs department.

“Japanese consumers like to try new things … so when something new comes from a foreign country, it often gets attention on TV. And people will stand in a long line in front of the store without hesitation,” Adachi said, explaining why he believes the Seattle-based chain made such a big splash when it arrived in Japan.

But in a market where the next new thing comes and goes in the blink of an eye, a company needs more than just novelty to survive for more than twenty years, Adachi said. He said the key is to gain acceptance as a part of the community by respecting the local culture.

In a change from its standard-issue decor, Starbucks opened a Japanese-style coffeehouse in the ancient capital of Kyoto in June — a nod to local culture that also made headlines. Housed in a century-old two-story townhouse, the store features a tatami-floored room for the first time in Starbucks’ history, the company said. The store is located in Ninenzaka, a popular tourist street that slopes down to the UNESCO World Heritage-listed Kiyomizu Temple.

Starbucks has opened other specially-designed stores all over Japan, including one near Meguro Station in Tokyo inspired by traditional architecture and an outlet featuring traditional woodwork near the Dazaifu Tenmangu Shrine in Fukuoka Prefecture, designed by renowned architect Kengo Kuma.

But assimilation is not enough to keep a loyal following, Adachi said, adding that a branding strategy focused on maintaining the identity nurtured in the U.S. market is also behind the firm’s success.

“While trying to be integrated into a local community, we also try to blend in our own identity. And that creates originality,” he said.

For example, ordering drinks at a Starbucks outlet may pose a challenge for first-timers in Japan, as it uses unique names for the sizes of its beverages — Short, Tall, Grande and Venti — just like it does around the world.

For the Kyoto outlet, what Starbucks tried to express was a mixture of Western coffee culture and the ancient capital’s tradition, Adachi said.

“In theory, it may be better to offer services in the way customers feel the most comfortable. But that wouldn’t distinguish us from others — to create a reason to love Starbucks over other competitors,” he said.

McDonald’s and Starbucks are two examples of global retailers that have successfully taken root in the Japanese market by adapting their services to the consumer mindset, said Michiaki Tanaka, specially appointed professor at Rikkyo University in Tokyo who teaches business administration.

“These companies are so deeply rooted in the Japanese market that some customers may go to their stores without noticing they are actually foreign companies,” he said.

Many successful foreign retailers in Japan sell products that people consume occasionally, such as gourmet burgers — an area where foreign companies can use their image as global brand as a magnet, he said.

But if they are pursuing high sales volume and trying to expand their business, “just being unique is not enough to attract consumers,” he said.

Whether foreign retailers can thrive in the Japanese market depends on how much they can cater themselves to the consumer’s appetite for detailed, highly-mindful service, Tanaka said.

“The most important thing, after all, is always try to understand what customers ask of their brands and offer services to fulfill the demand,” he said.