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COCA-COLA IN JAPAN.
Term Paper ID:17374
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Essay Subject:
Overview of socio-cultural differences between Japan & U.S., economics; Japanese marketing environment in relation to Coca-Cola Company.... More...
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9 Pages / 2025 Words
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Paper Abstract:
Overview of socio-cultural differences between Japan & U.S., economics; Japanese marketing environment in relation to Coca-Cola Company.
Paper Introduction:
INTRODUCTION
In spite of all of the rhetoric, the American trade deficit with Japan remains in excess of $50 billion per year (Neff, Magnusson, and Holstein 44-52). Increasing trade with Japan is important to the United States in the context of its international trade imbalance, and it is important to individual firms because Japan represents a major, affluent market in which American firms, on the whole, have achieved but limited success (Enright 2-5).
The purpose of this research is to examine the process of marketing an American made product in Japan. In this research, the firm which is the focus of study is the Coca Cola Company.
The company's operations are considered within the context of the marketing of its soft drink beverages in Japan. Any firm
Text of the Paper:
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The size and duration of this surplusthreatens to spark trade restrictions by other industrial countries. Sogo shosha firmsare comprehensive, general trading firms. These firms functionwithin a policy framework established at the sogo shosha level. In the contemporary political environment in the United States,deregulation, and a tendency toward non-intervention by government in theprivate sector - economic or social - characterizes the general Americanattitude toward government's role in society. The American economy ofthe future will pay the price. Each of thesesets of factors is discussed separately, although they are, obviously,interrelated.Socio-Cultural Characteristics Japan's total geographical area (147,47 square miles) approximatesthe size of the State of California (Paxton 785). The soft drinks industry is an industry in which key goalsare most often stated in terms of market share. In actual practice,however, the Japanese government has erected trade regulations which makethe establishment of foreign industrial subsidiaries in the country quitedifficult ("Japan" 761). In contrast to that of Japan, the American population is more thantwice as large, and is growing much faster than is that of Japan. JAPANESE MARKETING ENVIRONMENT & THE COCA COLA COMPANY In the United States, the two industry leaders - Coca-Cola andPepsico - account for 7 .5 percent of the domestic soft drink market - 4 .3percent for Coca-Cola, and 3 .2 percent for Pepsico ("In Soft" 94). It is also necessary to knowhow those characteristics differ from those of its home country, and howthese differences will affect the marketing of its products. Theprobable solution to this problem is the adoption of policies which will(1) stimulate domestic consumption, and (2) make the Japanese economy moreopen to other countries. Japan's climate is northern temperate. Japan is one of the most technologically advanced countriesin the world, and, in 1989, is a major technological competitor for theUnited States. Rather, it is simply that Coca-Cola's chances ofsuccess would be much lower than they are operating through a majorJapanese trading company. In the past 2 years, however, this situation hasbeen rapidly changing. While it is quite likely that the company will desire to andwill attempt to achieve some consolidation in its international bottlingoperations, it is also highly probable that laws and customs in many of thefirm's host countries will thwart such a strategy. The question is when the bill will bepresented. Lastly, the distribution of consumergoods poses special problems for foreign companies marketing their productsin Japan. Thus, the real crunchcould come much quicker this time around. Using the Mitsubishi Company as an example, asogo shosha may be composed of more than 1 smaller firms, which areindependent of one another within the sogo shosha. Unemployment is not a serious problem, and has traditionally notbeen a significant problem. "Selling Consumer Goods to Japan." Business America 3 March 1986: 2-5."In soft Drinks, the Big Get Bigger." Business Week 8 Feb. In the UnitedStates, Coca-Cola generally attempts to be the owner of all of itsoperations. Thedifference also poses problems for American firms attempting to markettheir products in Japan. The Statesman's Year-Book 125th Edition. Merchandise Exports and Imports by Area, 1976-1985. The current Japaneseconstitution was virtually dictated to the country by the Americanoccupation forces, following the end of the Second World War. Japanese public consumption accounts for 8.7 percent of GNP(compared to about 17 percent in the United States). The effectiveness of these restrictions isevident in the country's balance of trade data. JAPAN & THE UNITED STATES: COMPARISON OF CHARACTERISTICS Comparisons between Japan and the United States are made in thecontexts of socio-cultural characteristics, political-legal structures,technological development, and economic characteristics. In fact, the company accounts for a full 12percent of Japan's total foreign trade. Economic Indicators 6 June 1989: 1.Council of Economic Advisers. The Japanese economy is not as heavily consumption-oriented as is theAmerican economy. "International Trade." International Economic Scorecard 6 June 1989: 2.Council of Economic Advisers. While host country customs, laws, and cultures may well dictate thestructure of the company's international bottling operations, they have nothad significant impacts on the company's international marketing efforts inmost countries. In many fields, Japan is the world leader in technology.In no field, is Japan an also-ran in technology.Economic Characteristics The American international trade deficit (the largest in the world)and the Japanese international trade surplus (also the largest in theworld) invite comparisons of the economic performance of the two countries(Council of Economic Advisers, "Total" 2). Coca-Cola, theproduct, has been well accepted in all markets, and the Coca-Cola marketingpractices, in general, have been accepted in most of the host countries inwhich the firm operates. "Total Output, Income, and Spending. The company's operations are considered within the context of themarketing of its soft drink beverages in Japan. Whencompared to the Japanese population, the American population is illeducated. Economic Report of the President. The country's principal natural resource is its population. They are typically the largestof Japanese firms, and they usually have close working relationships withthe Japanese government. T. In the process, they created a relativelyshort-lived economic nirvana for the United States. Unique cultural differences must be addressedby Coca Cola in Japan. (Ed.). In this research, the firm which is thefocus of study is the Coca Cola Company. "Rethinking Japan." Business Week 7 Aug. It is not enoughjust to know what these characteristics are. The relatively small amount ofarable land available prevents Japan from producing all of the foodstuffsrequired by its population. Washington: United States Government Printing Office (1989): 339.Enright, J. In the 198 s, the Reagan and Bush Administration cut taxes, financeda massive national defense build-up, and continued to spend massive amountson domestic programs (regardless of the rhetoric to the contrary). The Americaneconomy, by contrast, is heavily oriented toward domestic consumption.This difference in orientation is one reason why it will likely prove to beextremely difficult to reverse the Japanese/American trade distortion. The high levels of education and training whichcharacterize the population as a whole, together with the number of people,constitute a major natural resource for the country. As didtheir predecessors in the 196 s, they too attempted (Reagan) and areattempting (Bush) to be all things to all people. Where Japanese agriculture cannot provide for thecountry, American agriculture is capable of feeding both itself and a goodpart of the rest of the world.Political-Legal Structures The basic foundations of government in Japan and the United Statesare quite similar, because the present-day Japanese constitution waspatterned after that of the United States. In Japan, however,government intervention, and even government partnership with privatesector organizations, is an accepted way of life (Neff, Magnusson, andholstein 44-52).Technological Development The United States has long been recognized as the technologicalleader in the world. In 1989, the notable exception to this rule isin bottling operations. The massive size of the national debt and the mounting deficitsin the 198 s defy comparisons with earlier periods. The American government is characterized by separation ofpowers, with independent executive and legislative branches, whereas Japanoperates under a parliamentary governmental structure, where the executiveis selected by the legislature. Political and economic barriers to entry are alsoassociated with the Japanese market. 1989: 44-52.Paxton, J. The company's North American bottling operationshave been consolidated, while the international bottling operations remaindiversified. Japan's population density is 822 persons per square mile. Each of these policy initiatives, were they to beimplemented, would prove to be of enormous benefit to an internationalmarketer such as the Coca-Cola Company. INTRODUCTION In spite of all of the rhetoric, the American trade deficit withJapan remains in excess of $5 billion per year (Neff, Magnusson, andHolstein 44-52). The two major macroeconomic problems facing the United States in mid-1989 are (1) the magnitude of the federal budget deficit, and (2) themagnitude of the country's international trade deficit. Toimplement the strategy, the company (1) continually develops new productsto meet changing public tastes, and (2) modifies existing products to meetmarket demands (Coca Cola Corporation). CONCLUSION Doing business in Japan is a new experience for most Americancompanies. Such comparisons becomecompelling, when it is considered that America's largest bilateralinternational trade deficit is with Japan, and that Japan's largestbilateral trade surplus is with the United States (Council of EconomicAdvisers, "U.S." 339). Japan is ostensibly an open market country. In the 196 s, theKennedy and Johnson administrations cut taxes (revenues), financed a war,and expanded domestic spending. Less than 14.5 percent(21,135 square miles) of the country's total geographical area, however, issuitable for purposes of agriculture. 1988: 94."Japan." Exporter's Encyclopedia. For the most part, the Coca-Cola Company attempts to conduct itsinternational operations along the same policy lines as it conducts itsNorth American operations. The American economypaid the price in the late-197 s and the early-198 s. Japan has a highly educated and a highly skilled labor force.Approximately 7 percent of the country's population is of working age (15-to-64 years of age). U.S. Thisjoint venture, a separate Japanese firm in its own right, conductsproduction and distribution operations for Coca-Cola products in Japan. The lifetime employmentpolicy is not practiced by all Japanese employers, but it is practiced bymost major employers. The Coca-Cola Company, in operating with a sogo shosha, entered intoa joint venture with one of the member firms of the sogo shosha. It is the largest such concern in Japan. Annual Report--1988. The purpose of this research is to examine the process of marketingan American-made product in Japan. Affiliation with a Japanese sogo shosha firm is often the best wayfor a foreign firm to gain entry into Japanese markets. Works Cited"A Failing Grade for American Science Education." The New York Times 27 Feb. New York: St. The Coca-Cola Corporation is no exception. J. New York: Dun's Marketing Services, 1986: 2.761.Neff, R., Magnusson, P., and Holstein, W. Thisfactor is one which companies attempting to market their products in Japanmust confront.Japan's major economic problem area in 1989 is its export surplus statuswith other industrial countries. This type ofcomparison between Japan and the United States is presented in thefollowing section, which is followed by an examination of the marketingenvironment in Japan, within which Coca Cola must be prepared to compete. Increasing trade with Japan is important to the UnitedStates in the context of its international trade imbalance, and it isimportant to individual firms because Japan represents a major, affluentmarket in which American firms, on the whole, have achieved but limitedsuccess (Enright 2-5). Thus, as much as Pepsico's president likes to say"the other guy blinked," the fact is that Coca-Cola emerged from the frayin a stronger market position. The Japanese economy is oriented toward the export of ahigh proportion of the goods produced in that country. The strategic goals of the company are to attain significant annualmarket share gains in both the domestic and international markets. Japanese law and business customs dictate that, in Japan, Coca-Cola must operate through one of that country's major trading companies.It is not that Coca-Cola would not be permitted to establish an American-type operation in Japan. Atlanta, Georgia: Coca- Cola Corporation, 1989.The Conference Board. Thepopulation of approximately 12 million has been stabilized at this levelfor more than a decade. In the 198 s, this strategy has even extended to theacquisition of controlling interest in the major Coca-Cola bottlingcompanies. Martin's P, 1988.----------------------- 11 The basic business plan at the Coca-Cola Company revolves aroundmarket share. Where many multinationals find that significantalterations must be made in marketing programs in foreign countries, suchhas not been the case for Coca-Cola in most instances. TheCoca-Cola Company's market share has increased more than 13 percent sincethe introduction of "new" Coke and the eventual reintroduction of "old"Coke as "Classic" Coke. Thecompany's products span a range of more than 25, separate items.Approximately one-half (49 percent)of the company's operations involveimport/export activities. Any firm desiring to besuccessful in the marketing of its products in another country must becomeaware of the characteristics which define that country. Investment in Japanaccounts for approximately 29 percent of GNP (compared to about 17 percentin the United States), and exports account for approximately 11.3 percentof Japan's GNP (compared to about six-percent in the United States).Japanese, thus, are far less prone to consume than are Americans. 1988: 24.Coca Cola Corporation. The climate is favorable toagricultural pursuits; however, the country is short of arable land. Private consumption accounts for approximately 51 percent of Japan'sgross national product (GNP), compared to about 6 percent in the UnitedStates. Certainly, there are exceptions to this rule; however, allrecent international comparisons have found that students in the UnitedStates rank well below those of Japan and most other industrial countries("A Failing" 24). Entry into and subsequent successful operation in specificinternational markets, however, often create significant difficulties forCoca-Cola. In the context of land and land use, the United States is farsuperior to Japan. One of the reasons for this state of affairsis the country's lifetime employment policy. The United States now has significant technologicalcompetition. The Mitsubishi Corporation is the fifth largest private sectororganization in the world. Thispopulation density, coupled with the fact that much of the country'sgeographical area is mountainous, has caused Japan to become a highlyurbanized country, with more than four-fifths of its population living inurban areas. Coca-Cola has adopted anaggressive marketing strategy. Labor force growth, however, is less than one-percentper year. Problems of this type have been particularly relevant to thefirm's activities in Japan. Thetemperate climate is also suitable for industrial activities of almost allkinds. The actual structure of government in the two countries is quitedifferent. Foreign operations contribute approximately38 percent of Coca-Cola's total sales and approximately 48 percent of thecompany's total profits. This bilateral disparity in Japanese/American tradehas developed without (1) Japan becoming America's largest trading partner(that honor goes to Canada), and (2) in the absence of any significantpetroleum trade between the two countries.
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