CASE STUDY

Apple Japan By Asia Pacific Ventures, Inc.

Introduction With Macintosh sales doubling over the last few years, Japan has become Apple's fastest growing major market. The 1 trillion yen Japanese PC market, the world's second largest after the U.S., is still dominated by NEC with a 53.4% share; how- ever, Apple Japan has grown to become the largest foreign firm in the market. Apple's share of Japan's PC market has increased from less than 1% in 1988, to 8.3% today, which is number three overall in Japan's market. Apple Japan's goal, which is to have 10% of Japan's market by 1994, would mean Apple Japan would have sales of $1 billion, or about 10% of Apple's total corporate sales.

Japan now accounts for 20% of Apple's interna- tional sales and 40% of the Apple Pacific division, which includes Asia and Canada. In Japan Macintoshes are being used not just for desktop publishing and graphics design, which Apple dominates, but also for office automation, networking, and data- base applications. In fact, N EC recently signed a contract to purchase AppleTalk, the network-managem ent software developed by Apple Computer.

Apple Japan 8.3%

Fujitsu Ltd. .q Ro,&

Total shipments, 1992: 2, 226, 800 units

I / C 14.o-/o

Source: The Nikkes Weekly

Figure 1. Japan's personal computer shipments, 1992

Apple Japan's goal, which is to have 10% of Japan' s market by 1994, would mean Apple Japan would have sales of $1 billion, or about 10% of Apple's total corporate sales.

Apple Japan History When looking at Apple's success in Japan, one must remember that a few years ago Apple was not well known and suffered from an image problem in Japan. In 1980, Toray, a Japanese textile trading firm, was working with Apple in the U.S. to develop the Apple IIJ (the Japanese Apple II with a katakana

Copyright�9 1993 by Asia Pacific Ventures, Inc. Reprinted with permission.

See page 115 for brief author biographies.

phonetic Japanese keyboard and software exten- sion). Toray became Apple's exclusive distributor in Japan, replacing the import of Apple products by various companies, none of them authorized Apple dealers. But, with no computer experience and no

contacts in the Japanese computer equipment and software markets, Toray turned out to be a bad choice for Apple. Two years later, ESD Labs became the exclusive distributor of Apple products in Japan. But Apple also had problems with ESD. High prices (double that of the U.S.) opened the way for a

flurry of imitators from Southeast Asia, Taiwan and Japan. These imitators soon took over the market- place as their clones were often of a higher quality than Apple Japan's originals.

In 1983, Apple switched distributors once more, this time to Canon Sales Corporation, a month before Apple debuted its Lisa computer in Japan. Six months later, the Apple IIc was released, targeting the teenage and hobby market, but pdces were prohibitively high. To make matters worse, Japan's NEC, Fujitsu and Sharp already dominated the market. Apple's Macintosh was introduced in

54 TECHNOLOGY TRANSFER December 1994

Japan five months later. Over the next three years, Apple introduced upgraded computers and KanjFl'alk software releases. While these products were well designed, Apple Japan was experiencing operational difficulties in bringing these new products to market. Apple Japan's product line was incomplete and had yet to be fully localized to the Japanese market. Staff and distribution channels were also inadequate for the expected sales growth. While Apple Japan tried to sell the Japanese and 5 English-language version of its 6 product, it went through four general managers in five years, 7 seriously damaging its credibility 8 among the Japanese. Apple slowly 9 learned that long-term promotional 10 and marketing programs are required in international markets, where opinions change more slowly than they do in the U.S.

Table 1. Japan's top 10 selling PC models (Mar '93)

1 PC-9801 BX/U2

2 PC-9801 NA/C

3 PC-9821 model $1

4 PC-9801 NS/R

PC-9821 As/U2

PC-9801 NS/T

Mac LCIII

Mac Color Classic

PC-9801 BX/M2

PC-9801 US

Source: Nikkes Industrial Daily

The Takeuchi Era After moderate growth in Japan in the '80s, Apple decided to further Japanize its operations for the '90s. Apple brought in a new native management team headed by Shigechika Takeuchi. Takeuchi

campaign was the creation of a high profile image for Apple in Japan. An intense advertising campaign on TV and in the press promoted Macintoshes as a creative, user-friendly tool. Apple also gained

publicity in the Japanese investment arena by listing its shares on the foreign stock section of the Tokyo

NEC Stock Exchange. One approach that Takeuchi has

NEC taken is to make the prices of Apple's

NEC products attractive to the Japanese NEC consumer. To this end, Apple intro-

, NEC duoed significantly lower prices on new lines of computers, including the

NEC Mac Color Classic which is priced

Apple around $2,070--a significant change Apple as the Macintosh Classic line ac- NEC counts for more than half of Apple's

unit sales in Japan. It is important to NEC

realize that in Japan computers priced under 200,000 yen (approximately $1,800) are considered to be an

expense instead of a capital investment, and purchase orders can be typically made by low-level managers. This popularized the lower-priced Macintosh Classic. Now the Macintosh Classic also appeals to first-time users, who in the past wanted to buy a Macintosh, but could not afford one.

came from Toshiba's European operations to become President of Apple Japan in 1989. Eighteen months later Takeuchi was appointed to a Vice President position of Apple Computer, Inc. Today, Takeuchi is again President of Apple Japan.

Aware that Ameri- can companies face an uphill battle in their

Apple slowly learned that long-term promotional and marketing programs are required in international markets, where opinions change more slowly than they do in the U.S.

struggle to win acceptance among Japanese consumers, Takeuchi lowered prices, expanded distribution, and added Japanese software pack- ages to the list of products. Also included in the new

Distribution Along with pricing, Takeuchi tackled Apple's distribution problems in Japan. To move more machines through Japan's distribution maze, Apple found it necessary to broaden its distribution throughout Japan. Takeuchi set out to strengthen Apple's distribution channels by signing on Fuji-Xerox, Minolta Camera, Brother

Sales, Kokuyo Company, and Mltsubishi Corpora- tion, bringing Apple Japan's total to over 50 distribu- tors. Takeuchi followed up this effort by building a network of 21 "Apple Centers" which are retail

December 1994 TECHNOLOGY TRANSFER 55

outlets dedicated to selling Apple hardware and software; Takeuchi hopes to increase the number of Apple Centers in Japan to 100 by 1995. Currently Apple has over 2,300 outlets in Japan.

Localization Even with an effective distribution network to get the product to the consumer, Apple Japan had to ensure that the product was localized to the Japa- nese consumers' needs. An advantage of the Macintosh is that it is easier to localize into another foreign language than the operating architectures of its competitors. In 1989, with the introduction of the IINTX-J printer, a Kanji version of its high-end Postscript laser printer, Apple prepared for the first time to offer a line of Japanese-language products. In many ways the Macintosh, which allows users to point & click to icons instead of typing in computer commands, is the ideal machine for handling Kanji (which consists of over six thousand characters) because it offers a graphical interface for a graphical language.

Apple's KanjiTalk systems enable the

Users can choose Roman or Kana input from the control panel.

Third-Party Development Research and development in Japan concentrates on software compatibility with Kanjffalk, the Japa- nese language operating system of the Macintosh. The third-party role in producing Japanese language software is crucial for making the Macintosh more marketable in Japan. There are currently over 1,000 third-party software applications for the Macintosh in Japan. The following Apple groups help third- party developers and distributors.

An advantage of the Macintosh is that it is easier to localize into another foreign language than the operating architectures of its competitors.

standard Macintosh operating system to handle Japanese menus, fonts, and automatic translation from phonetic script to ideograms. KanjiTalk re- quires a MacPlus or higher with a hard-disc and 2MB of RAM. The extra RAM is needed because the large Japanese character dictionaries in the System and System Folder must hold many fonts. Apple also provides a KanjiTalk Tool Kit which is an information kit in English that provides help to foreign developers in localizing their products for Japan.

Another feature Apple Japan developed exclu- sively for the Japanese market is the Kana-key- board used by the Macintosh. This is the same as all Macintosh keyboards, except it has a Roman character (ANSI standard) and Kana character (Japanese phonetic JIS standard) on each key.

Apple Pacific Third Party Marketing Group Apple Pacific's Third Party Marketing Group

offers technical, market- ing and distribution consultancy, and support to developers who want to enter Pacific markets. This group delivers product design, develop- ment consultancy, and information and assis- tance in the planning of localization, marketing, and distribution strate- gies to developers. The goal of the Pacific Third

Party Marketing Group is to increase the availability of quality localized products in Pacific markets by working closely with other Apple organizations in Cupertino, California, as well as the Apple Pacific subsidiary offices.

Apple Japan Market Development Group Apple Japan Third Party Marketing is part of the

Market Development Group (MD). In addition to the third-party team, the MD group has managers who focus on desktop presentation, multimedia, net- working & communications, education, and produc- tivity. Marketing activities include third party partici- pation in events, event materials, brochures, promotions, the Marketing Direct Newsletter, and training. Third Party Marketing provides information and consulting on the Japanese markets and its distributors.

56 TECHNOLOGY TRANSFER December 1994

Apple Japan Developer Technical Support Group

The Apple Japan Developer Technical Support (DTS) Group exists to support local Japanese Macintosh developers that produce KanjiTalk compatible software and hardware. This group works closely with Apple's R&D and DTS groups throughout the world to transfer informa- tion to and from Japan. The Apple Japan DTS Group also provides English documentation and technical notes to local developers.

is currently experiencing in the U.S. market. Profit margins on the user-friendly Macintosh computers have traditionally been high in Japan, but the price war has forced Apple Japan to significantly lower

Apple does not have the luxury of a large user base to afford maintaining a premium for its proprietary Macintosh operating system.

The Japanese Developer Management Group This group provides evangelism, such as

seeding, events, distribution assistance for foreign developers, main contact for Japanese Developer Program members, etc. This group also consists of subgroups, among which are the Apple Japan Developer Program, the Japan Supplement, and the Developer University in Japan.

Outlook In 1992 Apple increased PC shipments by 45.8~176 propelling it to third place in the Japanese market while sales increased 32% to 66 billion yen. Under the direction of President Shigechika Takeuchi, Apple Japan is shooting for a 10% market share and sales of 100 billion yen by 1994, and Apple Japan's goal is to reach $1 billion in sales by 1995.

Although Apple Japan has gained ground in Japan's PC market, it also must remain sensitive to the ongoing PC price war. Apple does not have the luxury of a large user base to afford maintaining a premium for its proprietary Macintosh operating system. Apple will have to cut prices to stay abreast of the competition or else face the same problems it

In the near term, Apple' s greatest competition is expected to come from Microsoft and Windows 3.1J.

the prices on new lines of computers.

Apple Japan has been able to find new markets in the public and education sectors. Currently Apple's sales breakdown is 50% to business, 40% to individual users, and 10% to education and government. Takeuchi

would like to see 10% of sales go exclusively to government.

One last item on Takeuchi's agenda is to expand Apple's product list. A newer, faster Japa- nese version of the Macintosh operating system will be ready by late 1993. Apple has also developed the Newton through a joint venture with Sharp. The Newton is a handheld Personal Digital Assistant (PDA) that will send data messages through wire- less transmissions.

In the near term, Apple's greatest competition is expected to come from Microsoft and Windows 3.1J. Graphical User Interface appeals more to the Japanese with its object orientation, hence Apple's success in Japan. However, Apple's good fortunes may not last long as Microsoft's Japanese version for Windows 3.1 is expected to take the market by storm (Microsoft expects sales of Windows 3.1J to

exceed one million units in the first year). Apple has long been able to maintain a premium because itwas differenti- ated from other PCs in the market. Windows 3.1J has changed all that by giving PCs a similar operating format that is

more oriented towards the Japanese user. In conclusion, Apple must strive for new ways

to differentiate itself in the ever-changing Japanese computer market. Knowing this, Apple intends to

December 1994 TECHNOLOGY TRANSFER 57

innovate with wireless technologies, PDAs (New- ton), Worldscript, and multimedia PCs to stay ahead of the competition and maintain the image of

innovation and style it has established over the last few years.

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