Japan is a strange place, especially when it comes to doing business. On the surface, it looks like an easy place to do business. The restrictions from the government around setting up a company and getting a visa have been loosened. If you’re trading something that can’t be bought or manufactured in Japan, then you’ll usually have an easy time. The country has an excellent infrastructure and processes for shipping, emergency recovery etc, so there aren’t any of the risks that you have when you look into the developing world. And, of course, it’s the world’s third biggest single economy, and it only slightly lags behind the combined GDP of the EU.

If you’re selling something that the Japanese want, there’s no doubt you’ll make a lot of money.

And yet, I can almost assure you that your business growth won’t be what it is when you compare it to other developed economies such as Germany, the US or the UK. On paper, these countries should be pretty similar, with roughly equal GDP growth rates, GDP/Capita, bank interest rates etc… but there is something else that holds you back as a foreign company in Japan. There’s an invisible set of rules that you need to follow. If you don’t know about these rules and follow them, you’ll have mild growth at best, or a worst your investment will run out in a few years and you’ll head back home.

To explain what I mean, I’d like to talk about two probably related cases. I say probably because I’m not 100% sure if this is going on or not, but I have recently seen the similarities. The first is about TV stations.

If you are to build a TV station anywhere in the world, you’ll usually do a lot of research, come up with some plans, engage a consultant to help with the design, speak to manufacturers to share ideas and learn about the latest and greatest technology, and then build your facility, train your staff and operate your TV station. You’ll hammer down the pricing everywhere that you can, and (in most cases) you’ll be pretty careful not to look like you’re playing favourites or doing anything under-the-table.

Not so in Japan.

If you want to build a TV station, you’re only talking to one of two companies; NEC or Toshiba. That’s it. In a very distant third place is Sony Business Solutions, and after that Ikegami. But those are usually for smaller systems, like an individual TV studio, not a full-blown station.

The average cost of a Japanese TV station would be at least 25% more expensive than a system of the same specification in the US or EU. I know of systems that are much more than that. For example, a system clock for a TV station can be bought for about US$10,000 (for a mid-range model), whereas the only system clock that is in use in Japan will cost you US$300,000.

But herein lies the rub. Welcome to the Money Washing Machine.

Whilst there is nothing explicitly written in the contract, if you win a project to build a TV Studio for, say, US$10 Million, then you will be expected to buy at least US$1M of advertising on that station. This works if you are a manufacturer of consumer and business goods, like Toshiba or NEC (or Sony), but not so much if you are only manufacturing business goods. I know of one person who had to buy airtime for his audio codec service (something used in pro radio) during the middle of the night else he wouldn’t get the contract.

On paper, this looks like a total impact of US$11M; Toshiba gains $10M, and the TV Station gains $1M. But, in reality, the impact should only be US$9M. That’s a problem when you look at the official figures and decide to invest in Japan.

So this brings me to Nisshinbo.

Almost everyone in Japan knows the name “Nisshinbo”. They run huge marketing campaigns, under the slogan A necessary company in today’s age.

And yet no-one knows what they do, to the point where their TV ads are literally pop singers making up songs with the lyrics:

Nisshinbo, Nisshinbo, I’ve heard the name

Nisshinbo, Nisshinbo, I don’t know what they do.

At the end, instead of saying “We do X”, the two dog executives basically say “Damnit, she doesn’t know either,” and they show the A necessary Company tagline. Here’s a link if you don’t believe me.

https://www.youtube.com/watch?v=hXZa8eVKns8

 

Nisshinbo is a massive Business to Business company, selling things like power, batteries, automotive brakes, chemicals, and precision instruments. None of these things are directly sold to the public, so why do they need such a massive (and constant) advertising campaign.

It’s really quite simple.

dsc_0719
So, whilst writing this article, Nisshinbo was advertising on the Shinkansen…

Many of the businesses in Japan are owned by massive holding companies, or Zaibutsu. An example are the train groups, like Tokyu, who not only own and operate some trains, but have a line of supermarkets and department stores that are conveniently located near their stations.

When you get a little more esoteric, you have a housing construction company that shares its branding with one of Tokyo’s main TV stations.

And then there is Dentsu, one of (if not the) world’s biggest advertising agencies and broadcast rights holders. About 80% of the advertising in Asia goes through Dentsu. So, if you want people to know what you do, or you want to make TV or movies in Asia, you need to do what Dentsu tells you. I think I might write another post about Dentsu, as it really is about as close to the Illuminati as you can get in the modern world.

 

So, if you try and move in Japan and don’t follow the invisible rules, you’ll get chewed up and spit out before you even realise what is going on. And the public happily accepts this, enjoying their cheery “Nisshinbo” jingles and laughing whenever you ask them what Nisshinbo actually does (I originally thought that it was a securities and insurance firm before writing this). Just think about that for a moment; millions of dollars have been invested in an advertising campaign with the main aim to tell people that your company is important to them without actually ever saying what you do.

 

Now that is some serious level bullshit.

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6 thoughts on “The curious case of Nisshinbo.

  1. I dont quite get it, do you mean that b2b companies like Nisshinbo are forced to pay for useless ads, because of being chosen to do something else for a different company somehow connected to the advertising/marketing agency? And, if I got that part right, the reason for that are basically monopolies?

    1. Yes to both.

      It’s a confusing place.

      Basically, if you sell anything to Dentsu or a TV/radio station, you will have to advertise with them.

      And because of the nature of the monopolies here, basically every B2B sale is related, somehow, to one of the “Zaibutsu”

      1. Well I guess corruption will always be a thing, even among people famous for their honesty and work ethic. Or do you rather think it is something so deeply embedded in Japanese business culture that they consider it completely natural and maybe even “just”?

      2. It’s a bit hard to call it “corruption” as it’s more of a societal issue.
        One thing I’ve learned from working in Asia for the past few years is that there is a wide variety of definitions of “Corruption”.

        The Nisshinbo example (which, I have to say again, may not even be the case) shows the more passive end of the scale. It might not ever be expressed as “you need to place ads if you want to sell to us,” but more like “we want to thank you for buying $10M of Nisshinbo products. Here is an advertising campaign”.

        I’m trying to find a way to describe it, but so far the best I can think of is “Societal Favours”.

        I was thinking about doing a longer post on corruption. It’s easy to point at key cases, like politicians removing sanctions in return for receiving stock options in a company, but what about taking a consultant out for lunch?

        Or, as is the case in my current role, what about when my friends from previous roles now have purchasing authority and buy products from me?

        Maybe I’ll do a longer post on this next week with some examples from Aus, Japan and the rest of Asia.

  2. The proper term for an expected monetary “thank you” backed up by the unspoken threat of societal pressure and more importantly a monopoly or zaibatsu implied threat of harming reputation is called extortion. It appears one could sue over such means of extortion in Japan as it is illegal in theory but the societal acceptance of it would mean it was suicide for the company that sued even though it should be easy to prove given the patterns.

    1. That assumes that the laws for extortion are the same here as they are elsewhere. I haven’t really looked into it but maybe I will.

      It is also worth noting (as in the Corruption post) that I actually think that people do this mostly voluntarily – there is no pressure to do so (unless you consider ruling yourself out of bids on major projects “voluntary”).

      Like all things, looking at one thing in isolation isn’t going to help. You need to look at the whole interlocking system, which includes the laws, the society, and the business environment in which you are working.

      I get the feeling that this is why it is still so hard for a lot of western companies to become hugely successful in Asia – they are expecting to play by the same rule book. Also, in a country like Japan you can easily make an “ok” amount of business on the fringes of the “washing machine”that is spinning money around the country, so the corporate HQs are thinking that they are doing well…

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