How our Japanese competitor became our must win account

Further discussion from Davis Huang…

As mentioned last week, market segmentation, user community, and opinion leader concepts we discussed in the Caltech MTP course were really helpful for us to plan our strategies to sell semiconductor components into the Japanese market. So far Japan market entry sounds like nothing special, just a traditional marketing approach: Before we enter a market, we have to define our target segments, and pick a user group, and then find an opinion leader in that group to start with. Here it would be good to discuss a bit more about the difference between doing business in Japan communities vs. others.

As we all know that there are two types of Keiretsu in Japan: vertical and horizontal. But the boundary and characteristics of those Keiretsu in real Japan communities are not quite so black and white. Most Keiretsu are a hybrid of vertical and horizontal entities after more than 60 years of transformation under continuous expansion, diversification, or integration process since WWII. So most typical Keiretsu have covered several different business areas horizontally, from banking, trading, insurance, investment, real estate, construction, steel, chemistry, automotive, electronics, service, distribution and retail industries etc., and also have built strong vertical links to form a complete food chain within a particular industry. If you ask a Japanese company to show you their organization chart, typically they will give you a map of their group with list of names of all associated companies or subsidiaries. Furthermore, the Keiretsu typically interlinked or married with other Keiretsu and formed very complicated economic entities. They work together and also compete against each other.

When I first stepped on the land of Japan, I was impressed with this pretty, clean, and neat country and also felt very excited about the tremendous business opportunities we might get in this marketplace. But many questions immediately came to my mind after seeing so many famous brand name Kanbans (signs) and neon lamps along the street: Who can I sell to and how can I open the door? How can I apply those user communities and opinion leader concepts? And how to map out those big dinosaurs? It was a much bigger task to do market segmentation and define our strategies for this Japanese marketplace.

First, we looked at those Keiretsu and their electronics system business groups. In the past, almost all Keiretsu make all types of electronics systems, but they are now more likely to focus on some particular areas where they are stronger after facing the competition from other Keiretsu and the manufacturers of other countries. You still can easily find many well known brand names such as Panasonic, Sony, Mitsubishi, NEC, Toshiba, Hitachi, Fujitsu and Sharp belonging to different Keiretsu doing cell phones, TVs, video/audio equipments, and small home appliances etc. electronic systems. As mentioned last week, we didn’t have the market position and resources to serve too many accounts initially. We used  market segmentation concepts to select an electronic business group within a Keiretsu, and started working to form relationships within this first target user community. Second, we applied the user community model to layout subsidiary companies and their relationship within the target business group. Then we could identify an opinion leader within that community to start a sales process.

The opinion leader within the target community of the Keiretsu segment we chose was our competitor, a Japanese semiconductor maker!  Most Keiretsu are vertically integrated and have close relationships with semiconductor component companies.  And most of Japanese companies make business decisions based on their long-term relationship and mutual trust. We saw that to penetrate the Japan market we would have to solve a problem for a potential competitor because they were the entry point to the systems groups within the Keiretsu.  That particular opinion leader account, a must win account, we called a "benchmark account".  This win became extremely important for us to develop the credibility and reference we needed to get business from other users in that community.  Next week I'll tell you about how we formed a relationship with this opinion leader-competitor...

Comments

[Conrad]

Davis

On your comment 'We saw that to penetrate the Japan market we would have to solve a problem for a potential competitor' a somewhat similar scenario would be how Toyota, Nissan, etc. has developed key relationships with U.S. automakers to manufacture their vehicles and/or components in American markets. Sometimes your biggest competitors turn into your strongest allies although the competition between one another still exists. I have learned this myself with a number of industrial supply directories I manage for our company. We have 'teamed up' with a number of much larger industrial search engines, portals and directories to improve user experience for all parties involved but yet, continue to compete with one another.

[Davis]

Conrad

Competition is one of the most important driving forces for many industries beside innovation. In order not to turn into cut-throat fighting, sometimes it is mutual benefitial to cooperate with your competitors. There are many examples you can find in different industries. The industrial search engines and automakers examples you have mentioned. Here is another famous one: Sony and Samsung, Philips and LG, as well as Panasonic and Toshiba allied and built Joint-Venture together for the capital sucking LCD panel manufacturing factories. On the other hand, they are competing against each other in LCD TVs using the LCD panels supplied by their JV. Those companies are also big competitors among each other in many product areas. The key is how to find the different strengths that complements to each other.