Going Through Customs

Americans are selling the Japanese everything from shampoo to catering trucks. The trick is to play by their rules.

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Amar Bose is a man unaccustomed to failure. Designer of a unique audio speaker system that stood the stereo world on its head, he has spent two decades building his Framingham, Mass.-based Bose Corp. into a model of American entrepreneurship and innovation, with sales last year exceeding $85 million.

But when Bose turned his considerable energies toward Japan, the results were anything but impressive. Despite a strong marketing push and a deal with a major Japanese distributor, Bose failed even to dent the Japanese audio market. From 1970 to '73, for instance, the company sold fewer than 100 pairs of speakers.

"It was frustrating," the lean, graying Bose recalls with a pained expression. "I was convinced we had a superior product, and we knew the Japanese liked the quality. But nothing seemed to work. It got so absurd that I was embarrassed even to be in Japan. Our image was destroyed. There was nothing to do but pull out."

Such close encounters of the wrong kind have been all too common among American businesses trying to break into Japan. Looking for an explanation, many American companies and political leaders find a convincing bogeyman in the Japanese government's industrial policy, with its high tariffs, quotas, government-sponsored cartels, and seemingly arbitrary health and safety regulations. Others point to the insidious -- and very private -- collusion among Japanese businessmen designed to keep American companies on the outside looking in.

Clearly, these are difficult hurdles to overcome (see sidebar, page 183). Yet to focus on them is to miss the key point about doing business in Japan. Whether you are selling speakers or shampoo, terminals or trucks, you can succeed if you know the rules.

"It's so easy to make excuses for failure," says Bose. "Some like to say it's the government or cheap labor, but fundamentally, it's a question of understanding the people and the market. You have to understand the way Japanese think."

Japanese business, after all, is not like Japanese baseball, which is played much the same way in Tokyo's Korakuen Stadium as it is in Yankee Stadium or Wrigley Field. To compete, American businesses must get used to a completely different ball game, with a rule book that may seem nothing short of bizarre. But the prize -- a share of Japan's $126-billion import market -- should make the extra effort seem worth while.

RULE #1: FIND THE RIGHT PARTNERS AND MAKE THEM YOUR FRIENDS

Looking back at his company's experience in the early 1970s, Amar Bose identifies the key problem as the failure of his marketing people to establish close personal ties with their distributors. Japan is an intensely relationship-oriented -- not transaction-oriented -- society, and personal connections are the very essence of doing business nihon-shiki, or Japanese-style. Yet Bose's export sales staff never spent the necessary time, face-to-face, to convince its Japanese distributor of the advantages of Bose's unique direct/reflecting audio technology.

In fact, the Japanese were so unconvinced by the Bose system -- which bounces most of the sound waves off walls instead of spending them directly toward the listener -- that the distributors removed one of its essential components, producing a sound quality that Bose, an internationally recognized expert on acoustice theory, describes as "simply terrible."

"It was idiocy," he says. "Our marketing guy -- a graduate of the Sloan School of Management [at Massachusetts Institute of Technology] -- figured all we needed was to get the product out, and it would sell itself. Well, it didn't. There was no training, no communication, no nothing."

Lack of communication is bad for any business relationship, but it can be particularly devastating if you are trying to crack the complex Japanese distribution system. Japan, with an economy and population roughly half the size of ours, has more wholesalers and retail outlets than the United States -- a vast web of vendors ranging from large wholesalers in the major cities to tiny sub-sub distributors spread throughout the 1,000-mile length of the four main islands. This bewildering network is held together by friendships, school connections, and family relationships. And its members, as Bose discovered, frequently value personal relations -- often cemented during late-night drinking bouts -- above mere transactional considerations of technical superiority or price.

"Japanese suppliers and distributors absolutely discriminate," says Richard Adler, president of Corton Trading Co., a high-technology import-export company based in Tokyo. "If an American company has the only whoopty-do in the world, they can sell it. But when I went to Sony with a rectifier, they said they had rectifiers from their old suppliers in Japan. They didn't really care if the American ones were better or cheaper. It often boils down to the old friend who went to school with you or grew up with you in Osaka."

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