ComputerLand in Japan

Ahoud Al-Ajmi

Nathalia Copeland

Ali Tapper

Subsidiary Franchise

• A company who is partly or fully controlled ( 50% or more) by another parent company. Own shares in the company.

• Foreign subsidiaries must follow the laws of the country where the subsidiary operates

• License to open up business(es) by acquiring franchisor’s business model to sell products/services under the name of that business

• Allows home firm to enter country at fairly low cost , gains firm access to local knowledge and commitment from locals

• Grants local groups or entrepreneurs the right to market a company’s products within a certain location

• In this case, franchises are licensed by the subsidiary

The Issue:

ComputerLand needs to partner with a Japanese company to enter the Japanese market. Looking for:

• Experience in procurement

• Experience in distribution of computer products

ComputerLand’s top candidate: Kanematsu-Gosho

• Japan’s largest electronics trading company (http://m.csmonitor.com/)

• Experience in desired areas

• Had exclusive business dealings with IBM

Case Breakdown

Timeline of Events: Negotiation

• Chairman of ComputerLand was concerned that if his VP went to Japan, he would be disadvantaged in Japanese culture, so insisted negotiations held in US or by telephone from Japan.

• 9 months of negotiation through emailing/faxing.

• Japanese decision making process tends to have more consultation and agreement with company than with an American company

• Japanese government had to be persuaded that American partner could

have 50% ownership instead of minority position.

Kanematsu-Gosho will contribute cash to start the joint venture of subsidiary ComputerLand Japan Ltd.

ComputerLand will contribute knowledge, trademark, and technology.

Timeline of Events: Selection

Timeline of Events: Policy & Operational

Issues

CompterLand Japan Ltd. wants to open franchises in Japan. Could not find individuals who qualified/had necessary cash, so company had to own.

Other Issues:

Store size had to be reduced.

Had trouble getting top-quality employees to want to work for foreign company in Japan.

Coordination issues between proprietor-owned ComputerLand and publically owned Kanematsu-Gosho.

WHERE THEY ARE NOW?WHAT HAPPENED?

outlook

American vs. Japanese Distribution System

Joint venture

U.S. vs. Japan: Hofstede Comparison

Channel relationship based on Hofstede

Uncertainty Avoidance:

High uncertainty avoidance (Japan) • Rules and policies.

Low uncertainty avoidance (U.S)

• More flexible negotiations.

Collectivism vs. Individualism:

Japan is a collectivist society:• Relationship centered

• High context communication.

U.S is individualist society:• Negotiate on adversarial standpoint.

• Low context communication

Differences in management styles of Joint

venture

Choosing a partner

Long-term orientation (Japan):

• Objective: Gain American technology.

• Evaluate managers of the American company.

Short-term orientation (U.S):

• Objective: Penetrate market.

• Evaluating Japanese managers is not important.

Joint Venture

Americans:

Formal agreement leads to a successful joint venture.

Japanese:

Trust and confidence lead to a successful joint venture.

Thus: Good relationship should precede any formal or legal document.

The ‘9-Cs’ Criteria

1) Consumers & their Characteristics

2) Culture

3) Character

4) Capital

5) Cost

6) Competition

7) Coverage

8) Continuity

9) Control

Most Common Cause of Joint

Venture Failures:

Cultural differences

Poor or unclear leadership

Poor Integration Process

Global Players Struggling in Japan

Marketing Implications

Strategic Alliances succeed by learning the mindset of specific individuals

Cultural Compatibility

Market Compatibility

Questions

• Was it wise for ComputerLand to insist on holding the negotiations in the United States? What were the advantages and disadvantages for each of the parties? Why did Kanematsu-Gosho agree to the location?

• Analysis the differences between the Japanese and American distribution systems as they appear in this case. Which elements of the ‘ComputerLand model’ are transferable to Japan?

• When exporting to another country or setting up a joint venture there, how can you decide which of the local customs and business practices should be accepted, and which of your home country practices should you introduce?