No. 24: Change of Thought: from a commodity to something beyond a product (January 4, 2012)

Management:

Articles on stagnant economy prevail in media, and people cannot erase the indescribable feeling of insecurity in view of the ongoing world economy. The current Japanese government that promised to realize too many dreams is in the middle of snake dancing in face of harshness of reality. In a school athletic meet, teachers correct the snake dancing and let students parade straight. In the political world, however, there is no teacher who corrects the snake dancing. Most Diet members try to protect their own interests and internal rivalry precedes the consensus and agreement. The budget screening featured by the historic statement “Why can’t you be satisfied with second place?” has ended in the whack-a-mole game. One government-subsidized organization has gone, and one government-subsidized organization is born. The current situation is well predictable in advance. 　

It goes without saying that the infrastructure business in newly industrialized countries grows dramatically. As a country grows affluent, it naturally gives the highest priority to infrastructure improvement. Support from the political leader is vital to such a large project as infrastructure construction. The president of Korea took the leadership and got an order for the construction of a nuclear power plant in United Arab Emirates. In the past, we Japanese had a prime minister who took no action seeing the Toyota’s case in the U.S. saying that it was not a political issue, and a prime minister who declared “Goodbye to Nuclear Power Generation” proudly for sentimental reasons. The difference of the Korean leader and two Japanese leaders is enormously great. It is not too much to say that this hopelessly great difference creates the difference in the presence in the global market of the two countries.   

Now, we have to change the thought that a home electric appliance is a product to make living more comfortable. We are in the middle of the days that businessmen in advanced countries and those in newly industrialized countries alike are involved in the global business holding a smartphone with in one hand. Naturally, price competition grows harder. That is, it is extremely hard to compete with countries that introduce hardware at an incredibly low price in the global market if you market your products as commodities. An American solar panel maker that went bankrupt due to the inability to compete with incredibly low-priced import products epitomizes the current situation. It is the time that companies should market a product not as a commodity but as something beyond a product. Something can be defined as a product coming with such added value as the mindset and cultural heritage of the producer.  

Komatsu, a Japanese world-class construction equipment maker, has eight plants worlwide, but it has only one engineering drawing for each model that should be shared by the eight plants. Instead of building a model specific to a local market, the company holds a world content annually in Japan for engineers worldwide. It asks engineers and machinists coming from all over the world to think and take action to build a product in the Komatsu way. Yamato Transport, Japan’s leader of the home delivery business, is expanding business in foreign countries asking local employees to understand the Japanese culture and traditional concept. On the other hand, Fanuc makes strenuous efforts to develop its competitive edge through technological innovation in Japan and ship their state-of-the-art products from Japan, instead of building a plant in a foreign country. This is also a correct strategy.

The correct strategy, of course, depends on the company. What is important is to ship not commodities but products based on the tradition and cultural heritage of the producer to the global market.