In Japan, almost any vertical market you look at has two or three major players and then a big gap to the next. This is partly due to the famous Japanese consumer brand loyalty but also because of longevity in the market. Many of the Japanese brands have been around for decades and persevered through the good and the tough times.
Another big factor is the focus on competitive strategy. Japanese companies devote a lot of time to this in their planning process and product release. In my experience of working inside Japanese companies, I was constantly amazed at how much of the marketing budget is spent on researching, planning and strategising compared with the more outward or creative campaigns commonly associated with marketing strategy.
This approach can have a downside in that initiatives and ideas are readily copied from competitors. But the upside for the strongest companies is an entrenched and sustainable competitive advantage.
The automotive market is one example. Toyota has been the market leader in Japan for many years. But not just the leader, they turn over more than twice the revenue of their nearest rival, which is Honda. They do this year after year. The first foreign vehicle manufacturing company in the ranking in the Japan market is Mercedes Benz at #11.
The Japan beverage industry is another example. I have never been to a country that has such a complex beverage program as Japan. The Japanese consumers are demanding, and the key competition is fierce. New products (with or without alcohol) are launched every month. Kirin and Asahi are the two biggest companies. There is a gap to Suntory, and then the others fall off very quickly in comparison. Coca-Cola ranks 7th and is the first foreign entry. To achieve this ranking, Coca-Cola has adapted to the demands of the Japanese consumer by producing an extensive range of beverages not recognisable outside Japan.
Even though these companies are probably much bigger than your own, they have adapted sophisticated competitive strategies. Their competitive strategies are working because the competitive ranking in the market year after year seems to hold.
Even though your business may be smaller, the same principles can apply to your business planning and market strategy.
The most common competitive strategy model in use is devised and published by Michael Porter in 1985. It is well known, and so I will not dwell on the mechanics so much. However, it can be more than useful to use this model to start your process.
Here are some steps to get you started:
1. Cost Leadership: All industries require a cost leader, but you need to decide if this is best for your business. Cost leadership involves the requirement of a very tight supply chain that incorporates “severe” cost savings at each step. It also usually requires a higher volume of sales so that the overall profit number is high even if it is a lower percentage of the gross revenues or gross profit.
The most extreme examples of cost leadership I have experienced are in India. Of course, the market is huge, but the pressure on pricing is extreme. Whether you are selling mobile phones or eye surgery for cataracts, the Indian market has worked out a way to have a price point to excite demand while making a profit.
2. Differentiation: This means unique. Finding a unique position in a market can be done in several ways. Of course, the first mover in a market gives this advantage. However, unless the barrier to entry for your products and services is very high, then this will present a narrow window of competitive advantage.
An example of this is a prominent company well known in the shared office workspace market. Recently their structure and financial results have been big news items, but I want to focus on their strategy. They were late to the market, but they have differentiated themselves through the modern design of the workspace and the setup of a community by developing an internal “LinkedIn” style application that connects all the clients.
If you decide that a differentiation strategy is for your business, then you need to be very clear on what that is and if it is sustainable or just a fad.
3. Focus: This can be around cost or differentiation. If its cost focus then this means your brand is known to be the cost leader in that market segment. Cost-conscious people will deliberately use your services. In this context, Aldi supermarkets are a great example. The low-cost airline services also target this competitive strategy.
If its differentiation focus, then it means narrowing down what you do. You are also clear what you don’t do. People use your service or products when they want the best in that category. Price is secondary. This means you can charge a premium.
As an example, I use the services of shoe repairs in the iconic Strand Arcade in Sydney’s CBD. They are not inexpensive, but they are the best at repairing all types of shoes. They are always busy.
In conclusion: carving out your specific, unique territory in a crowded market requires the creation of a competitive strategy which is built on your business strategy. Being enthusiastic about your products and services is a good start. Having a clear and well-designed competitive strategy will help you get to where you want to go.
References:
· Mba Skool Website: Competitive Strategy
· Best selling cars website – 2018 (Full year) Japan: Best-Selling Vehicle Manufacturers and Car Brands
· Wa Pedia website – Beverages – Japanese Companies by Industry
· Competitive Advantage – Michael Porter 1985