Japanese Distribution Strategy

Citation

Perry, C. and Miyauchi, Y. (2001), "Japanese Distribution Strategy", European Journal of Marketing, Vol. 35 No. 5/6, pp. 765-770. https://doi.org/10.1108/ejm.2001.35.5_6.765.1

The Japanese distribution system has been debated in the academic, business, and public policy circles. Part of the blame for many countries’ trade deficit with Japan has been the difficulty of entering into Japanese distribution systems. Indeed, the Japanese distribution system has been described as ancient and complex , uneconomic and cumbersome, inefficient and costly, a welfare system, and old‐fashioned, in other words, it is is the longest (Paliwoda, 1993) and the most complex (Asia Pacific Food Industry, 1994) in the world.

Thus it is not surprising that the US Government targeted the Japanese distribution system in its structural impediments initiative talks with Japan. However, trade negotiations alone will not enhance the ability of foreign firms to enter the Japanese market. A more effective way is to study Japanese business methods, and especially Japanese distribution channels (Czinkota and Kotabe, 1993).

This book is an important step in that direction. Its central theme is that the Japanese distribution system is changing into a shorter, simpler, and more modern system. The Japanese distribution system has changed drastically with the collapse of the “bubble economy” that resulted in a range of economic, social, and legislative changes, and because of it the entry of foreign firms has grown dramatically (p. 299). The book covers Japanese distribution strategies from the point of view of policymakers, business executives, and academics and addresses these questions:

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  Why is the Japanese distribution system changing faster now than ever before?

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  How should foreign companies respond to the changing market environments in Japan?

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  Could the US Government’s trade pressures work in the twenty‐first century to pry open the Japanese market to US and other foreign products?

Essentially, the book’s strength is its structured approach to analysing the Japanese distribution channels from a variety of perspectives, covering many topics about many distribution channels.

The book is the product of many researchers working together for a better understanding of the Japanese distribution systems and grew out of a 1998 conference sponsored by both the American Marketing Association and the Japan Marketing Association. Moreover, both editors are eminent. Czinkota of Georgetown University used to be the US Deputy Assistant Secretary of Commerce for International Trade and is now the chairman of the Foundation for International Business Education and Research. Kotabe of Temple University is the director of its research at the Institute of Global Management Studies.

The book is divided into seven parts and this review looks at each section in turn. Conclusions are then drawn for policy makers, academics and business executives.

Part 1: introduction

The first section of the book is an introduction. The first chapter emphasises the importance of studying distribution channels in the international marketing disciplines – “… distribution is in reality the most fundamental of international business decisions – influencing corporate performance for the duration of the business activity. If you can’t get it there, it won’t be sold” (p. 3). The second chapter examines the role of Japanese distribution strategies, illustrating difficulties of accessing Japanese distribution channels and identifying Japanese trade barriers. This chapter gives a sound overview of what is happening with current Japanese distribution channels and illustrates the changes in the Japanese distribution systems that have brought new opportunities for market entry and penetration for foreign firms. This first section of the book is effective in drawing the interest of readers.

Part 2: changes in the Japanese channel environment and structure

This second section of the book contains six chapters about changes underway in distribution channel environments and structures. It examines changes in areas such as wholesaling, retailing (such as discount retailers, department stores), and retail consumer behaviours.

The first chapter of this section gives a good review of the changes in wholesale distribution in Japan, and the linkages between channel environment and distribution strategy. Japan’s continuous recession in the mid‐1990s resulted in consumers putting more emphasis on price (as compared to quality) than ever before. As a consequence, large retailers started cutting the length of distribution channels to reduce retail price, resulting in a decline of the number of wholesalers resulting from the merger and acquisition of local wholesalers by national wholesalers (p. 19). Manufacturers search for the shortest path to the consumer market and large retailers search for the shortest path to supply sources (p. xii). The shorter distribution channel leads to price reduction at the retail level and might have led to the growth in the number of the discount stores in Japan as well.

Thus another chapter of this section is about discount retailing in Japan. As consumers became price conscious, new shopping and buying patterns of consumers’ buying in discount stores emerged. “While Japanese retailing is generally stagnant, the discount sector continues to grow … The appearance of discount retailing in Japan has important implications for consumer goods companies interested in exporting into Japan … as it may open new entrance possibilities” (p. 48). Some international discounters are active in other Asian countries, but not in Japan, and a window of opportunity for Western discount retailers exists. The number of foreign retailers in Japan is still relatively small and most of them tend to concentrate in the high‐end luxury sector (p. 60).

The other chapters of this section deal with the supplier‐buyer relationship in department stores, grocery distribution channels, consumer behaviour and retail store choice, and the effect of changes in the environment on retail structure. The strength of this section is that it deals with many topics. Perhaps this section could have examined distribution systems in a greater variety of industries and compared the changes, but the book is already detailed enough.

Part 3: collaboration in distribution, and Part 4: supplier‐distributor relationships

The third and fourth sections of the book are concerned with the important notion of collaboration and relationships within the distribution channel, for example, within the Japanese cosmetics industry and by Japanese automakers within the US auto market. Collaboration is one major method by which actors try to redesign the value chain from manufacturer to consumer in the late 1980s and 1990s (p. 121) and major companies at all levels of the distribution system are entering into new relationships to strengthen their competitive positions (p. 129). Increases in the efficiency of physical distribution are the overall goal of process‐oriented collaboration in logistics, while strengthening assortments of products are the major aims of product collaboration. The cooperation between general trading houses and major retailers has seen trading houses becoming a buying agent overseas for major retailers (pp. 124‐9). These aspects of collaboration in Japanese distribution should be of considerable interest to foreign retailers or manufacturers, as they are strongly related to accessibility of the Japanese market (p. 130).

Part 5: internationalisation of Japanese retailers, and Part 6: implementing distribution change

The fifth section examines activities of Japanese retailers overseas and is therefore not related to accessing Japanese distribution channels from overseas. In turn, the sixth section examines two royalty structures in the Japanese convenience store industry and the innovations of the convenience store ordering system in Japan. Thus this section is of somewhat limited interest.

Part 7: changes in distribution approaches

The final section of this book deals with changes in distribution systems. For example, the chapter about Japan’s second distribution revolution examines the successful foreign retailers in Japan, how they entered Japan and what are the underlying reasons for their success. It also illustrates how large‐scale retailers such as Virgin and Toys ‘R’ Us changed the traditional industry specific distribution channels in Japan (p. 301). Also, it examines environmental and organizational factors underpinning the success of global retailers (p. 304). Environmental factors include economic forces (such as falling real estate prices and falling value of the yen), social forces (such as growing demand for low‐cost goods), and legislative forces (such as demise of the LSRS law). On the other hand, organisational forces include competitive forces (such as intense competition in domestic markets and willingness of Japanese firms to form alliances) and competitive advantages of foreign firms (such as unique product concepts) (p. 304).

The book does not have a concluding chapter to summarise the book and tie together implications of how foreign companies should respond to the changing distribution systems and how foreign companies could leverage off this opportunity. But the book’s strengths make up for this lapse.

Conclusions

In summary, the book explains many recent changes in Japanese distribution channels and the opportunities arising from these changes. It is clearly essential reading for those who are interested in reading authoritative reports about those distribution changes. For example, academics and marketing students could gain insights into the recent development in Japanese distribution channels. In turn, business executives will also find it is worth studying, provided they search for the particular topics they are interested in. In particular, those from the retail industry will find many articles that could interest them. However, business people from industries such as high technology and those who are interested in e‐commerce, may not like this book because it does not provide enough detail of their industries. Nevertheless, overall, this book is essential reading for its thorough overview of the Japanese distribution system in many major industries.