FOCUS - JAPAN: Consumers battle corporate Goliaths - A spate of problems has exposed an uncaring corporate culture in Japan

Japan's embattled corporate culture will need more than the axing of company chiefs following a summer of crises that exposed huge gaps in the country's once formidable industry. With the reputation of three of its leading companies tottering from a spate of scandals, Japan Inc desperately needs to reinvent itself, while reinforcing the "quality first" positioning that helped power the country's economy throughout much of the '70s and '80s. Whether the crises were the result of cutbacks in quality control following Japan's prolonged recession is uncertain. What is certain is that they showed up a lack of accountability, transparency, customer concern and crisis management skills, which need to be shored up if Japanese brands are to dominate in an increasingly customer-centric global market. So far, the response to Snow Brand's contamination scare that sickened nearly 15,000 people, Mitsubishi Motors' 20-year cover-up of customer complaints and the ongoing Bridgestone/Firestone tyre crisis that has been linked to 134 deaths in North and South America have kept with cultural norms. The heads at the three beleaguered corporations were forced out - the latest to go at the end of last month was Bridgestone/Firestone chief executive and chairman of US operations Masatoshi Ono, who was largely invisible in the early days of the tyre crisis. Ono's departure follows the replacement of Snow Brand's president Tetsuro Ishikawa with managing director Kohei Nishi, and Mitsubishi Motors' president Katsuhiko Kawasoe with Takashi Sonobe, an executive vice-president in charge of alliance matters. Few believe this adherence to cultural norms will achieve much, unless Japanese industry take the crises to heart and updates the prevailing corporate culture, one that harks back to Japan's "history of recovery and development since World War II", according to Grey Worldwide Japan president and CEO Terry Mori. There are various aspects to this, as Mr Mori explained. The interest of organisations and companies always precede individuals. "Priority for a company employee is, in most cases, protection of the company before the safety of consumers," he said. "This is often true from the management to plant labour." Over the years, Japanese management also appear to have picked up on the bureaucrats' habit of concealing mistakes and leaving them to their successors to resolve. "The same applies to Mitsubishi. There have been management and senior managers who came to know (the bureaucrats' style of operation) well," said Mr Mori. Unfortunately, it's not a corporate culture understood elsewhere. For that matter, neither is it accepted in today's Japan amid the rise in consumer power. Though nowhere near Western levels, Japanese consumers have shown an unwillingness to accept corporate misdeeds. This was clearly seen in the way they shunned Sogo, outraged by a plan to use taxpayers' money to bail out the bankrupt department store. So Japanese companies that shun these lessons could well find themselves losing their customers and their investors. Even their companies. All three companies saw their share prices slashed by as much as half in the weeks following the crises. The bottomline for one of the corporations has also fallen victim to the crisis. At the end of last month, Snow Brand announced a group net loss of US$442 million and a pretax loss of $501 million for the last fiscal year, compared with a previous earnings estimate of $84 million in group net profit and a pretax profit of $214 million. As part of the restructuring to return to the black in 2003, the company will cut its workforce by 1,300 to 5,500 and directors' salaries by 30 per cent. Bridgestone/Firestone customers have already lost faith in the company. An independent online survey by I.think Inc found that only 30 per cent of those polled said they would buy a vehicle with Firestone tires. The poll also found that only 26 per cent thought the tyremaker acted responsibly and had done all it could to correct its problems. "All three instances are examples of flawed corporate governance and crisis management systems," said Ms Fumiko Kinoshita of Hakuhodo's corporate public relations division. "There are many lessons to be learnt, both in terms of crisis response in times of trouble and risk management to prevent such problems in the future." Meanwhile, all three companies have pledged to win back customers' trust. Snow Brand's 'customer first' policy has led to the setting up of a product safety audit department under the president's supervision, and with a third party specialist member. It also introduced a 24-hour hotline. The departure of former president Mr Ishikawa along with seven executives was part of a revamp of management after it was stung by charges that it was slow-footed in responding to the contamination crisis. "As one of the ways to rebuild our image, we have now increased our disclosure level," said Snow Brand Hong Kong general manager Takahiro Hamada. Mr Hamada pointed to the setting up of a management advisory committee, which comprises external specialists, expansion of its Web pages for investors and customers, and changes to its labelling system to help customers identify which factory produced the product being purchased. Mitsubishi, which is partly owned by DaimlerChrysler, said it will "rethink the whole vehicle building process" and seek to "uncompromisingly create and supply products and services to satisfy customers". The country's fourth-largest auto-maker has also promised to become more transparent in its dealings in making its "transition into a global corporation" said its PR department manager N. Nishizaki. But will these promised changes actually lead to much-needed accountability and transparency? Changes both in and outside Japan will probably force change on corporations. As the global marketplace opens Japan up to more customers and investors outside, the pressure to change will become both immense and unavoidable. A revolution that is gaining ground within is also expected to force the issue. "Gentle Japanese consumers now have a weapon to confront big companies - the Internet," said Grey's Mr Mori. "There have been several cases in the past year or two where consumers have won against major companies with the help of the Internet."

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