Euromonitor International's research analyst, Tomoko Tanoura, explains the strategy of overseas expansion by Japanese companies. Since 2005, Japan's population has been shrinking due to constant low birth rate. This indicates that the Japanese economy will also shrink year on year. Overall, the economy in Japan is not faring well, experiencing negative GDP growth in both 2008 and 2009.
Japan's shrinking and graying population coupled with a weak economy means the demand for consumer products in Japan will not be bright in the forecast period. From this point of view, Japanese companies are trying to look to expand into overseas markets for their survival.
There are many successful Japanese multinationals that do well outside of Japan. Other than the car manufacturers such as Toyota and Honda, there are also many successful Japanese companies ranging from consumer electronics companies, such as Panasonic, Sony, Toshiba, and Sharp Corp to beauty and personal care companies such as Shiseido Co and Kao Corp.
These companies have been actively establishing their overseas business for a long time which helps explain their strong presence in international markets. In fact, in certain categories, Japanese companies are the largest players globally. For example, Japanese companies such as Sony, Nikon, Canon, Panasonic, and Olympus dominate digital cameras and digital camcorders throughout the world.
However, it should be noted that there is a lack of big Japanese companies operating globally in industries such as packaged foods, alcoholic drinks and non-alcoholic drinks. Even though there are companies operating in the Asia region, overseas sales usually form less than 10% of total company sales.
It is not until recently that Japanese companies from these industries actively looked outside of Japan. For example, Asahi Breweries, Kirin and Suntory were acquiring overseas companies. Japanese food and drinks companies need to look outside of Japan to actively sustain growth.
When expanding, one key point is that Japanese multinationals need to be less complacent and react more to consumers in different regions. Consumers are aware of the high quality of Japanese products, but the cost of a product is an important factor that influences purchasing decisions. Another important factor will be how products are designed and marketed to consumers. This is especially crucial in the volatile global economy where consumers will be spending more prudently.
Korean companies such as Samsung and LG are gaining on Japanese companies in consumer appliances and consumer electronics, so Japanese manufactures must step up competition in these areas.
It is never too late to expand, even in areas like common food products such as chocolates, where brands like Ferrero Rocher can be successful globally. Hence, it is possible for Japanese food and drinks brands to be successful globally as well.