Japanese Companies and Strategies for Cultivating China’s Middle-End Market

ABSTRACT

The cultivation of emerging markets is accelerating as a result of the financial crisis. The Chinese economy, which has seen per capita GDP top US$3,000, continues to grow at a comparatively high level, and the middle-income bracket has increased dramatically. While there is also growth in the consumer market, the corporate market (B2B) such as energy-saving and environmental business has been growing rapidly. New efforts such as responding to market changes, appealing to customers, and developing PR strategies are apparent among Japanese companies eyeing the expanding Chinese market.

Case studies confirm, however, that Japanese companies are conflicted between their commitment to the high-income and high added value market on one hand, and developing the middle-end market on the other. This paper offers suggestions for cultivating the middle-end market—while also maintaining strategies for the high added value market—such as brand strengthening that adds “change” and “vigor” to “high quality” and “eco”; establishing multi-brand and multi-channel strategies; improving total cost performance by omitting excessive quality and luxurious services; and garnering sales know-how in not only low-cost production but in the middle-end market as well.

The cases also confirmed that despite boasting advanced technology and high quality, certain Japanese companies are struggling because of their inability to get an early read on market changes and China’s performance-oriented policy. Based on best practice analysis, this paper recommends that Japanese companies quickly establish a performance-oriented business model, and at the same time gather experience and know-how domestically while acquiring qualifications, human resources, and know-how through local M&As.