Every day there are more American companies attempting to expand their operations into Japan. These companies face a number of critical decisions such as which marketing strategies to use, selecting entry strategies, and numerous operation, financing, and management decisions. Many companies have tried to enter Japan's market and have failed. Two companies that have been extremely successful in Japan are Starbucks and McDonalds. Since both of these companies have entered Japan, each has grown significantly and are still expanding today.
Starbucks Coffee Japan was established in October 1995, as a joint venture between Sazaby Inc. and Starbucks Coffee International, the international portion of Starbucks Coffee Company. Starbucks believed that using a joint venture would allow them to better penetrate the Japanese market. The advantages of establishing a joint venture in Japan include greater access to local information and conditions, ease in identifying and hiring local personnel, and immediate access to customers. These advantages helped the organization grow and gain a competitive advantage. Since opening the first store in 1996 at Tokyo's premier shopping district, Starbucks has become a leading specialty coffee company in Japan. They averaged the opening of two new stores per week in 2001. They have approximately three hundred stores now open in Japan, and are forecasting the 500th store opening in 2004.
A key element in Starbuck's success was that the company did not try to use the exact same marketing strategy as the one used in the U.S. Combining their know how with Sazaby's marketing to develop a new type of coffee store, they took into consideration the cultural and economic differences in Japan and addressed them. Starbucks focuses on satisfying each customer by tailoring their products to the specific tastes of the customer. Since entering the Japanese market, Starbucks has received recognition from top Japanese publications and business organizations for its world-class customer service.
Starbucks provides an experience for each customer who comes to the store that goes beyond just a cup of coffee. They provide an atmosphere that is well received and customer service that is appreciated. This is one of the reasons that Starbucks has been accepted so well by the Japanese culture. Also, the focus on trust and respect has had positive effects for the organization.
Another reason that Starbucks has been well -received is because they have made attempts to get involved with the community. One example of this is the Challenge Program. The Japanese community has taken to heart the young Japanese athletes that have made it to the professional leagues in the U.S. Kazuhiro Sasaki is a baseball player who plays for the Seattle Mariners as a relief pitcher who posted a new club record last year with 45 saves. He is a superstar in Japan, and Starbucks has used his image as a way to get involved in the community as well as a marketing tool. They have designed a program that gives money to a high school foreign exchange program that is set-up between Seattle and the Japanese city of Kobe. Starbucks allocates 100,000 yen every time the pitcher earns a save, which will be used for visits by the international students from the sister cities. They allocated 4.5 million yen last year to the Challenge Program 2001. They have also brought Sasaki into the stores and had him serve to customers to gain public notice.
Starbucks did not radically change their product line to enter the Japanese market. They offer most of the same exact products as they do in the US. When comparing the list of products offered in a store located at the Kansai International Airport in Japan to the menu of s Starbucks in Seattle, there are hardly any disparities. There are only a few drinks offered at the Seattle location that can not be purchased in Kansai. For example, Cinnamon Spice Mocha is not offered in Japan, more than likely due to taste preferences.
Not only has Starbucks done well in the community, it has done well in the stock market. Since its initial price offering on NASDAQ Japan, it has seen significant increases of up to 30%. The Starbucks offering in Japan is the first time the company has sought a stock market listing overseas. Even the though Japan market itself has gone through some struggles, the Starbucks stock continues to improve. It seems to appeal to retail investors, probably because the minimum trading unit is one share. Starbucks plans to use proceed from its initial public offering in Japan to fund an ambitious expansion plan in Japan.
Another U.S. company that has done extremely well in Japan is the American icon McDonalds. Last summer, the U.S. fast food chain became the biggest initial public offering on the NASDAQ Japan market. McDonalds Japan was established in May of 1971. It has expanded tremendously in Japan since then. In December of last year, there were 3,822 McDonalds restaurants open in Japan. Of these, 2,899 were company owned, and 923 were franchised. After its opening in Tokyo, the company acquired the market's top position and two years later annual sales exceed 100 billion. The total number of customers who visited the restaurants of McDonald's Japan in 2000 was 1,318 million. This translates into more than 10 visits per year by every Japanese citizen.
McDonalds has also focused on customer satisfaction. They believe that a customer will be satisfied when a well-balanced meeting of all service expectations occurs, such as in terms of price, taste, service and restaurant cleanliness. That is what McDonald's Japan intends to achieve through its "Value Strategy." Accordingly, they made extensive price revisions in 1995, reducing the prices of major products without sacrificing service or product quality. Now, the average spending level per customer at McDonald's Japan is far lower than that at competitors. This has helped McDonalds achieve such a significant share of the market in Japan.
McDonalds Japan has also focused on product innovation and improvement. They have put great effort into new product development. The monthly appearance of new products is another big reason for repeat customers at McDonald's Japan. Their product development efforts are based on careful surveys of customer satisfaction. Test menus, which are sold for a limited period help detect consumer preferences in Japan and allow McDonalds to gear their products towards the tasted of the consumers. This research and development is vital for an international company's success overseas.
McDonalds Japan has also invested in research to determine where to open new stores in Japan. An important management resources that has enabled the strong growth of McDonald's Japan is McGIS, or McDonald's Geographic Information System. This system was internally developed in 1996 to facilitate the process of opening more than 300 stores annually in the best possible locations. McGIS allows McDonalds to determine where to open a new store with less than a 5% risk of error. This tool has been extremely helpful, considering the amount of stores being opened in a foreign market.
The issue of store openings has also drawn some attention. McDonalds has a vision of opening 10,000 stores in Japan. They want to do this without effecting the stores that are already open. They have reduces the annual new store opening number to 300 to minimize the effect on current operating stores. It has been approximately 450 stores per year.
Another item that McDonalds has addressed is the method in which new stores are built. They have turned to a modular restaurant building style. This is unique in Japan. Previously, they spent 40 days for construction, but they only need one day with the new method, so they can operate the new store for an additional 39 days. Also, construction costs can be reduced by almost 20%. In particular, the modular building is expected to play a key role in the promoting of the relocation strategy for optimum replacement of existing stores.
It is obvious that McDonalds has invested a great amount into research and development. They have also done intense research on the product lines they offer in Japan. They offer a number most of the same products as in the U.S. such as cheeseburgers, Big Macs, chicken mcnuggets, and fries. But they also offer a number of items that are unique to the Japan stores. For example, they offer a teriyaki burger, chicken tatsuta sandwich, and Japanese beverages.
Both of these American companies have been well accepted by the Japanese economy. They have focused on customer satisfaction and tailoring to the customer's needs. McDonalds has focused more on research and development and has been around much longer that Starbucks, but both companies are doing very well in the economy and in the Japan stock market. Both companies have focused on gaining the trust of the customers and providing a pleasant experience for them each time they visit the store. This has been one of the keys to success for these companies.
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