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Apple? Japan Can't Say No


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APPLE? JAPAN CAN'T SAY NO

HOW APPLE IS EXPLOITING ITS RED-HOT SUCCESS

Just about every six weeks, even when things are hopping in Silicon Valley, Apple Computer Inc.'s John Sculley boards a plane and takes off for Japan. The chairman's trips are more than regular corporate travelthons. To Apple, they're the crucial component of a deadly serious mission. The goal? To win over the most sophisticated consumer-electronics market in the world.

The mission looks to be right on target. For starters, the company's sales in Japan are red hot. From a few thousand units in 1988, Apple Macintosh sales exploded to 55,000 in 1990, 120,000 in 1991, and a projected 180,000 this year (chart). Market share leaped accordingly, from less than 1% of the Japanese market in 1988 to nearly 6% now, says market researcher Dataquest Japan Ltd. Indeed, if the company can win just two more percentage points of the $7 billion market, Apple will edge past IBM Japan to break into the country's top five of personal-computer sellers. And Mac sales are soaring despite a slumping market overall: Last year, PC sales in Japan contracted by 3%.

NEW DEALS. This year, Apple just may grab the honor, thanks to new distribution deals that could move it into Japan's lucrative corporate market. Since January, five major Japanese companies have signed up to sell Macs, including business-equipment giant Brother Industries, stationery leader Kokuyo, Mitsubishi, Sharp, and, in June, Minolta. Says Tokyo-based Dataquest analyst Katsushi Shiga: "I wouldn't be surprised to see them take 13% of the market."

But Japan represents much more than a new batch of customers for Apple. The company's Japanese connection is part of its core strategy to become a player in the world's gigantic consumer-electronics market and to pull away from the pack of U.S. personal-computer makers fighting for modest profits and tiny gains in market share. The strategy: Working with Japan's manufacutring giants, Apple will pour its distinctive software into a new generation of consumer-electronics products. Apple wants to be, its executives often say, the Microsoft Corp. of consumer electronics.

To execute the strategy, Sculley has spent a good part of his time on those Asian trips building blue-chip alliances. The result: Sony Corp. manufactures Apple's smallest laptop, the PowerBook 100. Sharp Electronics Corp. will make Newton, Apple's brand-new electronic organizer. And insiders say Apple is close to announcing that Toshiba Corp. will manufacture a new, portable, color "multimedia" Mac that combines video, text, and sound. "Everyone wants to partner with us," boasts Satjiv Chahil, vice-president for marketing for Apple Pacific.

With the deals, Apple gains a competitive leg up on two of the computer industry's megatrends: the move toward ever smaller computers, and toward computer-cum-consumer-electronics machines. Indeed, while Compaq, Dell, IBM, and AST Research fight another vicious price war, this one launched June 15 by Compaq Computer Corp., Apple is marching toward whole new markets.

The strategy has big risks. With so many irons in the fire, Apple could find itself overloaded and distracted. And by making its distinctive software so widely available, Apple could dilute its appeal. There's also the worry that Apple, which is manufacturing fewer of its own computers, may lose control of its destiny even as it's trying to make headway in the consumer-electronics field. But risks are better than failure, which until recently was Cupertino (Calif.)-based Apple's experience in Japan. "We were there for almost 10 years without success other than novelty sales," says Chahil. "We did everything wrong." Indeed, Apple didn't hit its stride until three years ago, thanks mostly to new Japanese-language software for the Mac, and some new executives, notably Shigechika Takeuchi, a former Toshiba executive in charge of Toshiba's laptop efforts.

Important, too, was a campaign aimed at building Apple's cachet. The company, for instance, played host to a 1990 Tokyo performance by Janet Jackson. The sexy pop star packed the house, and each of the 60,000 fans found a bag full of Apple literature on his or her chair.

HIP KITSCH. These days, Apple tries to foster its hip image by marketing its "Apple Collection" of T-shirts, jackets, coffee mugs, key chains, and other stuff through Tokyo retailers. Apple may shortly release a whole new line of such gear for Japan, Chahil says. Next up: an Apple-sponsored Japanese Ladies Professional Golf Assn. tourney in September.

Even without big sales in Japan, Apple probably would have been able to gain access to Japan's labs and negotiate deals with Japanese manufacturers. Nearly all U.S. PC makers, after all, have their own hookups with Japan's electronics giants. But Apple's determination to become a major Japanese player has plainly helped. "The Japanese are all scurrying to find higher ground," says Sheridan Tatsuno, author of Technopolis Strategy: Japan, High Technology, and the Control of the 21st Century. "One of the only places is Apple." Even competitors agree. "Apple is the only bright spot in the whole PC market," says Sharp Senior Executive Director Kozo Hayashi.

STACKS OF ORDERS. Apple's sales keep mounting. In April, the Nagoya University of Commerce and Business placed an order for 1,200 Apple notebook computers. And Mitsubishi soon will have an "Apple task force" of 50 engineers who will crisscross the company's vast client base pushing Mac-based networks. Their sales target: $238 million worth of Apple hardware, software, and peripherals for the fiscal year ending in March, 1994. "It's time for Apple to become less like a venture business and more like Mitsubishi," explains Yukihiro Kayama, Mitsubishi's general manager for technology affairs. "And it's time for Mitsubishi to get more like Apple."

Apple is also pushing hard into Japan's primary and secondary schools. Over the next five years, the Education Ministry will put 400,000 computers into schools across Japan, where the Mac's easy-to-use reputation is spreading. Check out Tokyo's Meisei Elementary School. There, 41-year-old Hidenori Shimizu puts pupils in grades four through six through regular paces on 22 Macs, running games, painting, and science software. The teacher chose Apple because "I don't want the children to think of computers as something you have to study," he says. "The machines should help you do other things, including enjoy yourself."

The Apple craze in Japan is raising fortunes for a host of smaller American companies. Aldus, Adobe Systems, and Quark are racing to "Japanize" their American software products. The same market is creating demand for other Mac-related gizmos. "Our products are flying off the shelves," says Laurin Herr, of SuperMac Technology, which makes color graphics gear for the Macintosh. And in any language, such words are music to Cupertino's ears.Neil Gross in Tokyo and Kathy Rebello in Cupertino, Calif.


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