The first few months of 2009 have not been kind to Japan’s global brands. Sony started the unwanted trend at the end of January when it forcecast an operating loss of US$2.9 billion for the financial year. Other iconic names, most notably in the consumer electronics and auto sectors, quickly followed suit, announcing disappointing balance sheets,included expected record losses for Panasonic and Toyota.
But in every crisis there is room for opportunity and the current economic malaise affecting Japan could open the door to a rethink of how these companies operate and what their brands represent to consumers in the domestic market. As Takashi Takeda, president and CEO of DDB Japan, points out: “The global financial crisis has triggered a significant change of tide for Japanese mega-brands; meaning they either adjust or perish.”
Japan’s multinational brands have enjoyed almost unparalleled growth over a period of some four decades or more. Previous downturns, most notably the economic bubble of 1989 and the 1997 Asian Financial Crisis, left them, for the most part, unscathed. The current impact of a global sales slowdown,however, combined with a changing consumer landscape,both in Japan and overseas, means these brands are facing an entirely different challenge this time around.
“My sense is this will lead to a massive re-evaluation of their strategies as exports dry up after they’ve made a major investment in global expansion whilst at the same time there is not enough demand domestically,” says Mark Webster,CEO at JWT Tokyo. “Already, we are seeing restructuring of top management, with the next generation leadership taking over at Sony, Toyota, and Honda. Added to that,you have a cut down of manufacturing where factories are literally moth-balled for a few months. Panasonic has pulled out of TV plasma screen manufacture completely.” It is not that any of the giant brands are in danger of collapsing any time soon— after all,Sony, according to its 2008 results, still boasts revenues of close to $90 billion.
Instead, it is more about these companies going back to basics and focusing on building their brand strength. This is especially true for those brands that overextended themselves in recent times — Toshiba and Honda, for example, which between them have expanded into product ranges as diverse as big screen TVs, lawn mowers and even nuclear reactors.
“I don’t think there will be an economic ;decline of Japan’s big brands; rather,I think there will be a rationali- sation of product lines and that the brands will specialise and become stronger,” says Blair Currie, CEO, Japan and Korea, at Aegis Media.“By focusing on a more narrow product or service range, these brands can find more distinct points of difference and thus strengthen their positions.”
Adding to the woes of Japan’s multinational brands is the growing threat from domestic challengers. While Japanese consumers are famously loyal,this loyalty is relative and.in a recessionary market where consumers priorities are changing, the competition for this loyalty is heating up, with the emergence of a number of new domesticbbrands.
“Japan’s brands such as Toyota and Sonysays Terence Oliver, Asia-Pacific CEO at Interbrand. “It does, though, seem likely that exciting new challenger brands will emerge in response to the new market environment.Thisb was certainly the case following the bursting of the bubble economy, which led to the emergence of brands such as Uniqlo and Rakuten.”
These leaner, more compact brands are finding a niche in the market; a niche that has been cemented by the current downturn.
“Even before the recent financial crisis took root at the end of 2008, Japan was movdsssssing to a more casual culture,” says Currie. “Value-based brand such as Uniqlo and H&M were gaining strength and people were less interested in luxury goods..” With consumer spending shifting from a conspicuous model to one where financial outlay is far more considered, those brands that are able to evolve to a new business model will be the best placed to succeed.
“Brands need to keep up with the times. If you are selling a premium product in a market that is rewarding value you better change your value proposition by either giving more for the same price or offering the product for less,”adds Currie.
This does not necessarily exclude the old guard. In fact, Martin Roll, CEO and business and brand strategist at VentureRepublic, believes the established brands have just as much to gain in such an environment as the low-cost newcomers.
“On the one hand, customers may embrace [the new brands] because they offer similar product for lesser price,”he says.“But on the other hand, it might have to overcome an enormous ‘liability of newness’ as it lacks legitimacy and brand recognition in the market place.Customers planning on spending on their meagre resources will be more careful to save up and buy established brands than just buying cheaper unknown brands.”
But building brand value and customer loyalty is not about price alone. Equally important is the ability to connect with people on a broader level than before, to be able to offer consumers a promise that reflects values they find important.And it is here that the big iconic brands appear to be still playing catch-up.
BRAND JAPAN: IS IT UNDER THREAT?
No |
YES |
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Martin Roll CEO, VentureRepublic |
Mark Webster CEO, JWT Tokyo |
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“The answer depends on how we define Brand Japan.Whenever we say brand, we invariably refer to its credibility, its legitimacy, and its appeal with multiple external stakeholders. Similarly, when we say Japan, we talk about Japan’s efficiency, cutting edge technology, thriving economy, consumer culture, quality products and companies. So, Japan’s brands are a huge component of Brand Japan, but not the only component.As such, although Japan’s brands might suffer slightly because of the economic recession, but it won’t have an enormous effect on Brand Japan.” |
“There is no doubt Brand Japan is in decline. It certainly doesn’t help to have the Finance Minister humiliate himself on the global stage and the political situation at home in gridlock. Japan recognises it is losing leadership to China’s rising economy.And it also has the continuing demographic issue with huge ageing population and low birth rate. But there are hopefully areas where Brand Japan can continue to lead the world. Clean renewable energy, for example, and electric vehicles are areas where Toyota and Honda will be global leaders — once again.” |
“Ninetendo is a great example of a brand that’s captured a sense of happiness in the gloom of daily life,” says Webster. “A competitor to the giant Sony that is not just about the technology but talks to the heart of society, giving people fun and bringing families together.This is very important to Japanese, and they will support brands like this.”
What will be of crucial importance is how a brand communicates its key message with consumers .
Takeda says that the older brands in particular need to rethink how they engage with the market. Japan’s iconic brands, he argue,were built using a traditional awareness model based on share of voice on mass media. Forced to cut spending significantly, a whole new approach needs to be identified in order to maintain brand health.
“What Japanese mega-brands now require is truly integrated brand management,” says Takeda. “Japanesemega-advertisers tend to manage each communication activity individually. Moving away from this silo approach means a CMO role within the organisation needs to seriously be considered, to allow for the holistic brand management of marketing activities.”
Interbrand’s Oliver agrees that brand marketing needs to be reassessed. He points out that the seven brands that appeared in Interbrand’s annual ranking of the world’s top 100 brands have lost between four and 10 per cent of their value over the past six months.
“Specific actions include developing brand architectures appropriate to new market realities and ensuring that advertising and other communications messages are on-brand and effective,” he says.“ Tracing the ROI of investments in brand building and adspend will be of growing importance to C-level management.”
But while the next 12 months may see change in the Japanese brand landscape, consistency will also remain. As Roll points out, the leading brands in Japan are seen as iconic for a reason and that is not about to change overnight.
“Iconic brands refer to those brands that have been built by companies over a long period of time by constantly investing to ensure that the brandcustomer relationships are continuously nurtured,” he says. “Most endure the test of time. Iconic brands are not made in the short run.
Temporary fluctuations in the economy do not necessarily bring them down.”