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Page last updated at 11:55 GMT, Monday, 21 November 2011

Have Japanese brands lost their way?

By Dan Simmons
BBC Click

Tokyo skyline

Japan has dominated the world of technology for years, but have attempts by Apple, Microsoft and others dented the image - and profits - of its home-grown brands?

Everybody gets excited about technology but in Japan, they take it to another level.

Entire districts of Tokyo are devoted to robots, computers, gadgets and huge electronics shops.

But over recent years, the former dominance of Japanese brands in their own country has been challenged like never before by the new behemoths of South Korea, China and the US.

The Japanese have been married to technology for decades and their brand loyalty is well documented.

But whereas once these brands were nearly always Japanese, the lucrative market of the Far East has been the target of a number of other firms.

And this has had an effect on profits.


Nintendo started as a playing card manufacturer in 1889 but, starting in 1983, launched a series of consoles from the NES right through to the more modern Wii

Electronics firm Panasonic has over $90bn in total assets and is amongst the top 100 largest companies in the world

On revenues, Sony is the world's fifth largest media conglomerate. The name derives from sonus, the Latin word for sound

Canon - or Kwanon as it was then known - developed Japan's first 35 mm focal plane-shutter camera

Hitachi is one of the most diverse Japanese companies, with 11 different business segments

Fujitsu is the third largest IT services provider in the world, offering computers , cloud computing and other services

The electronics manufacturer Toshiba was formed by a merger in 1939, though it was not until 1978 that it was officially renamed Toshiba Corporation

Although Canon is growing - attributing much of this growth to emerging markets like China and India - others are not faring so well.

Panasonic recently predicted an annual net loss of 420bn Yen ($5.5bn, £3.5bn).

Hitachi too has recently reported a 48% fall in quarterly profit - though remains in the black - and others have struggled just as much.

Sony - one of the big Japanese brands - is expecting losses of more than $1 billion in the current fiscal year.

While some of the problems can be credited to global economic problems, and the earthquake and tsunami earlier in the year, some say that this could be a problem of Japan's own making.

"Sony's Walkman used to be one of the most valuable brands in the world," says self-confessed otaku - the Japanese word for geek - Steve Nagata, a consultant to firms who want to move to Japan.

"They just failed to keep up. When the iPod came out, they pushed the MiniDisc and they stayed with it probably far longer than they should have.

"They weren't keeping up with new digital technology. They are there now but they have lost so much ground."

That "mistake", Nagata says, is just one of several that Japanese firms have been making for years - born out of complacency with its once dominant position in the market.

Although Sony's CEO Howard Stringer believes that Sony would have been able to report a profit this year if it had not been for the tsunami.


Japanese electronic makers are trapped, looking out wishing they had pieces of a now larger and more lucrative global market
Steve Nagata, business consultant

Japan was one of the first countries to embrace 3G phone technology and flip phones but has since stood comparatively still.

Japanese smartphone usage is at around 6% of the population, compared to US and UK figures of around 30%, according to research from Google and the Mobile Marketing Association.

And Taiwanese, Chinese and Korean firms have been slowly taking over, lowering prices and working hard and aggressively at increasing market share.

This becomes even more difficult for Japan because the strength of the Yen makes everything more expensive to produce and export.

While government assistance has ensured Japanese firms have a market at home, as the technology sector has increasingly globalised, some see this now as more of a curse than a blessing.

 Sony Walkman WM-BF65 portable audio cassette player
Sony's portable music business has struggled since the iPod's arrival

"When Japan was such a centre point for technology, they took a lot of measures to protect this incredibly lucrative Japanese market," says Mr Nagata.

"But protection, in some ways, ended up cutting them off from the global market.

"They weren't really paying attention to the fast growth and demands elsewhere and now lots of Japanese electronic makers are trapped, looking out wishing they had pieces of a now larger and more lucrative global market."

Loyalty culture

Innovations from Apple and, in the gaming space at least, Microsoft mean that the US now has a foothold in the Far East.

And, just as it is difficult to change Japanese consumers' minds because of their loyalty, once they have stopped buying a particular brand, it is very difficult to get them back.

Sony, Toshiba and Hitachi are fighting back with a merger of their small LCD businesses. In a public-private partnership, the creation of the world's largest producer of touchscreen displays is hoped to make Japanese companies more competitive.

But bespoke hardware and expensive single-purpose gadgets - a market nearly unique to Japan - is no longer the cash cow it once was.

And it is easy to see how. As technology moves towards being increasingly mobile and increasingly affordable, the once unique developments now risk being undercut by a wave of cheap, user-friendly apps.

For example, why would someone buy a bespoke device for $100 (£63) if an app with the same functionality costs $3 (£1.90)?

The inexorable march of globalisation seems to have hit Japan hard, casting doubts over what Japan's own tech giants can do to stem the current troubles.

But, as Mr Stinger told the Wall Street Journal, "you have bad years, the trick is to weather them, learn from them, act graciously through them, and learn why and when you have to change."

The fact remains that the Japanese are still passionate about technology.

Japanese manufacturers just need to make sure they stay passionate about their brands as well.

Additional reporting by Alex Hudson

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