Cultural determinants in Japanese Market

Once a company decided to enter a new market, it has to take the cultural differences
identified in the foreign market into consideration, therefore choosing an adaptation
program accordingly. These cultural differences may include religion and social structure
that influence customers’ values towards a product, economic and political situation and
philosophies that affect the way customers react to the products, education, language and
education.
The Japanese economy and market situation in the period from 1960s to 1990s (the
first entry)
After Second World War, Japanese economy grew rapidly from under-developed to
developed status, especially in 1968 with an annual GDP growth of about 11.9% percent.
This makes Japanese economy the world’s highest GDP growth in 1968
(countryeconomy.com, n.d.) and the second largest market in the world, only behind that
of United States. (Japan Fact Sheet). From 1974-1979 economic growth slowed to 3,6
percent before slightly increasing to 4,4 percent in 1980’s.
As a result of this prosperity, Japanese consumers tend to travel abroad more, hence
developing more Westernized taste towards products and furniture in particular. Japanese
consumers also became more willing to make major (and minor) purchases. Moreover, the
high growth rates coupled with rapid expansion of the market are attractive motive for
foreign companies to invest in Japan.
 Figure 1: Japan Growth Domestic Product 1970-2016 (%)
However, in 1986 an economic bubble called Japanese asset price bubble broke out in
Japan, in which stock market and real estate were heavily inflated. This situation brought
IKEA into risk as Anders Dahlvig, IKEA group president and chief executive, stated that
IKEA was launch in Japan too early (News gate NY.com). Therefore, IKEA chose to
withdraw stores out of Japanese market in 1986.
For Japanese wood furniture market, According to Business America in 1988, demand for
Western style furniture in Japan also grew during this period and Japan government helps
by reducing regulatory barriers to import business furniture. (STOLBA, 2009)
The Japanese economy and market situation in the period from 1990’s till the
time of second entry
In the 1990’s, as a result of economic bubble, the Japanese government undertook
deflationary measures which contributed to a decline in the Japanese economy. The
average annual growth rate of GDP per capita was 0.5 percent in the 1991-2000 period
(Fumio Hayashi) . The economic decline in the 1990’s together with pressure from
Japanese trading partners and competitors forcing to open the market to foreign
competition. The government removed a number of restrictive regulations and the country
moved from being a well-protected economy to foreign investments to a more open
economy.
Before 1990, Japanese exporting firm had to face The Japanese Large Scale Retail Store
Law, which strictly controlled operating hours and store expansion of large stores, targeting
those selling imported products. The deregulation of this law in the 1990s and Japan's home
furnishings sector considerable expansion, being valued at 3.92 trillion yen in sales and
3,860 stores in 2003 (Japan External Trade Organization, 2005) have led to the second try
of IKEA to reenter Japanese market in 2002.
Geographic area
Japan is an island nation with limited the area of 378,000 km2. Only about a quarter of the
land area of Japan consists of plateaus and lowlands (Statistics Bureau, 2000). Thus, the
population tends to be highly concentrated with 93.5% of the population are urban dwellers
and the population density of 350 people per kilometer (United Nations, Department of
Economic and Social Affairs, Population Division, 2018) .
The concentration of the population leads to a concentration of employment opportunities,
entertainment, products, and services. Moreover, the large urban population also means
huge budget spent on Western furniture and architectural styles (Yoshino, 1975).
Due to limited surface area, most Japanese live in small houses and tend to buy small size
furniture to make use of the space. Furthermore, that Japanese children usually share space
with parents before marriage lead to the conclusion, that large sofas, beds and tables which
are top sellers in Europe would not attract Japanese consumers because they simply would
not fit into their homes.
Quality oriented and service oriented
Japanese consumers have been identified as extremely demanding because of their
emphasis on product quality and services. Generally, the quality of products and after-sales
services in Japan is uniformly high to ensure customers satisfaction. Because of their
demanding nature on services, Japanese people are not familiar with “flats backs” or do it
yourself kit that customers need to assemble from compact box themselves at home.
In the past, products made in japan usually had very high prices along superior quality and
customers do not mind it because they are product focus not price focus. However, since
the economic bubble in the 1990s, with the increasing number of foreign companies,
Japanese consumers have become more price conscious. They now also look for a better
deal, to experiment with products, and to be different from others. This could be an
advantage for furniture company like IKEA for having a unique concept (including a light
Scandinavian furnishing style, showrooms, flat-pack and self-assembling) and affordable
prices.
Homogeneity
Japanese consumers have many shared values and norms, and are relatively homogeneous
compared with other populations in other countries. Income differences in Japan are
smaller than in many other countries (Okahashi, Gary, & Cornish-Ward, 1998). Most
Japanese consider that they are in the middle of the middle class (Schütte & Ciarlante, Commented [H1]: Theem nguoonf
1998), which is an important guiding factor for foreign companies in their consumption
choices.
Collectivism
In Japan, Confucian ideals played a major role in the development of ethical philosophies
with such characteristics as morality, loyalty, humanity. The Japanese have been
characterized as group oriented, where harmony and loyalty in the group are greatly valued.
To keep the harmony of a group, Japanese consumers may express preferences
ambiguously and indirectly. Dissatisfaction with a product or service may be expressed
indirectly, and the provider must be able to notice it. “Asians are less likely to complain
when they receive defective products or inappropriate service; instead they change
companies and products silently” (Schmitt & Pan, 1994, p. 44).
Another aspect of Japanese life that are affected by Confucianism is in customer relations
long-term relationships between buyers and sellers is emphasized. Thus, salespersons tend
to place great emphasis on the after-sales service to keep customers satisfaction and loyalty.
Education
Education is highly valued in Japan, and the Japanese consumers spend ages exploring all
available information about a product before buying it to minimize the risks.
Lack of time
Japanese have little free time and this leads to the importance of time-saving products and
convenience in shopping. It is important for furniture provider to provide everything
needed with one-stop shopping in small size show room. Melville (1999) points out that a
do-it-yourself product should include all the required tools for assembly, thus removing
the need for additional trips to obtain these.

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