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| Japanese Mobile Phones Failed to Move in China |
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Japan's leading electronics conglomerate, Kyocera, has become the latest Japanese mobile phone company to withdraw from the Chinese market in early 2008. Since 2005, Japanese mobile brands such as Toshiba, Panasonic, NEC and Mitsubishi have all exited the Chinese market. Why would the technologically advanced Japanese companies fail in the world' largest mobile phone market?
Not about technologies
In terms of product quality, few companies can compete with the Japanese manufacturers, but that cannot guarantee Japanese mobiles' market shares in China. In China, mobiles are not only communication devices, but also symbols for individual identity and status. In addition to good functionalities, phones should also have magnificent appearances. For example, design superiority has been one of the reasons for Korean Samsung to gain popularity among Chinese consumers. Therefore Japanese mobiles, which have insisted on its long-held "functionally useful" mindset, are difficult to attract Chinese consumers.
Both Panasonic and NEC, which introduced many cutting-edge technologies into China in the past, have seen their mobile phone sales plummeted in China, further demonstrating that technologies are not the reasons for Japanese phones to fail in China. On the other hand, as technologies like phone camera and GPS are becoming more and more mature in recent years, Japanese companies are also gradually losing their technological competitive advantage.
Management culture
Due to historical reasons, many Japanese phone companies have come to China via joint ventures with state-owned Chinese companies, but most Chinese executives don't have decision-making authorities in their JV companies. It is not uncommon for Chinese executives to rise to the top in European and American JV companies, but that's not the case for Japanese JV companies. |
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Even if Chinese executives can unusually rise to the top, they will still be constrained by their headquarters in Japan. For example, NEC appointed Mr Lu Lei, a professional manager from Motorola, as its China CEO in 2004, but Lu didn't bring any expected changes to NEC's China operation. In his one year-plus tenure, apart from setting his own sales strategies in a limited scope, Lu seemed not to have much authority. Under the hierarchical approval processes, the Chinese team's decision making mechanism existed in name only. For fast moving consumer products such as mobile phones, slow decision making will inevitably lead to losing sales.
Unlike European and American companies which can timely adjust their strategies to suit the changing Chinese market, Japanese phones' rigid product strategy is also another reason for their failure in China. In terms of product development, Western companies can usually launch almost 40 new models in a year, compared to the 10-20 models by Japanese brands, which are relatively insensitive to market positioning. Many of them did know the market, but were slow to launch new products. And the matter got worse when they were also slow to develop distribution channels.
Suitable for bundled sales
Many Japanese mobile phones' entry into China was initially driven by CDMA programs of China Unicom, the second largest mobile carrier in China, and Japanese phones did once account for a large share of Unicom's products. The reason lied in Unicom's bundled sales of CDMA services and mobile phones, as Japanese phones' quality superiority was helping Unicom to promote its CDMA program. But while Unicom is ordering less and less mobile phones on its own account in recent years, Japanese phones haven't been adjusting their strategies to adapt to the changed Chinese market, resulting in companies such as Samsung capturing CDMA market shares from Japanese companies.
It is true that due the Japanese companies' extensive effort on research, development, production and management, Japanese mobile phones as a whole have the lowest repair rate in the market. Such quality assurance, coupled with advanced technologies, is favoured by most mobile service carriers, which don't care much about design and fashion. So for phone manufacturers which supply products to carriers, they certainly don't need much understanding of consumer demands.
But the Chinese mobile communication market is predominantly operating under a phone-SIM separation model, thus Chinese consumers have lots of choices. While Japanese companies can still dominate the premium electronics market of China with their advanced technologies, it will be difficult for them to dominate the mobile phone market, where technologies don't account for much competitive advantage, simply with product durability. Therefore the lack of both market strategies and product strategies has doomed the failure of Japanese mobile companies in China.
Ms Han Xiaobing, a senior analyst from Norson IT Consulting, attributed the reasons for Japanese mobile phone failure in China as follows: lack of localisation, Japanese executives dominating decision-making process with little understanding of the Chinese market; lack of product range and market responsiveness, with most R&D centres still located in Japan rather than in China; lack of economies of scale, with high costs leading to little price competitiveness.
Coming back?
Although Japanese phones could come into the Chinese market with their CDMA technology advantages many years ago, it will be difficult for them to make a comeback if they hope to capitalise on the upcoming 3G market in China. Japanese phone companies certainly don't have any competitive advantages in China's own TD SCDMA network, and even for the internationally common WCDMA network, the rise of Chinese mobile phone companies such as ZTE and Huawei will also pose a serious threat to Japanese competitors, not to mention their long time European and American rivals.
Produced by www.chinabizintel.com; Source: www.laoyaoba.com |
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