Capturing the Market with Strategic

Information Tools: How Japanese

Companies Are Winning Market Share
Tsutomu Sugawara
Association of Management Consultants in Japan
EXECUTIVE SUMMARY
To win against international competition, Japanese small- and medium-sized firms
must first succeed against their rivals in the domestic Japanese market. In this arena,
the Japanese customer is the true rival. Attention to customer needs and preferences
becomes essential. To create a new market, company managers must first have a clear
concept of what will enhance customer satisfaction before starting product planning.
The Strategic Information Tools System uses numerical analysis to determine the
correlation between customer satisfaction and price so that management can make
effective decisions. The author provides several case studies. 1998 John Wiley & Sons, Inc.

Due to the strong Japanese Yen and the collapse of the

so-called bubble economy in Japan, companies from all
over the world are now targeting the Japanese market.
Japanese companies, therefore, must take major steps in
order to win against international competition.
I often ask clients the question, Who do you feel are
your real rivals? Almost 100% will respond Competitors
in the same industry. Now, I would agree that competitors
are the main rivals but they are not really the true rivals. The
more correct answer is, The customer is the true rival.
Competitive Intelligence Review, Vol. 9(2) 4045 (1998)
1998 John Wiley & Sons, Inc.
CCC 1058-0247/98/02040-06

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For example, your customers might go to your competitors because your company doesnt provide enough
satisfaction in terms of product worth or quality, and customer service. How much customer satisfaction should
you provide? You must give them higher satisfaction than
the current level. Some proposed methods follow.
In order to see the difference between competitive
products, you can clarify the correlation between cost and
satisfaction, and then calculate if a certain product or customer service has sufficient competitive strength. If your

Strategic Information Tools

objective is to beat a competitive product, you might decide that your strategic target is to increase customer satisfaction by 30 points. That is, you must first analyze the
correlation of cost and customer satisfaction (by calculation), and then create a Strategic Information Tool that
the decision makers can use to formulate strategy.

TO SEE THE DIFFERENCE BETWEEN

COMPETITIVE PRODUCTS, YOU CAN CLARIFY
THE CORRELATION BETWEEN COST AND
SATISFACTION AND THEN CALCULATE IF A
PRODUCT OR SERVICE HAS SUFFICIENT
COMPETITIVE STRENGTH.

CASE # 1
Asahi Beer vs. Suntory Beer in Competitive Market
ShareA Large Difference in Customer Satisfaction
In the Japanese beer-brewing industry, market competition is extremely high. There are four main Japanese
beer-brewing companies (Kirin, Asahi, Sapporo, and
Suntory), and within the last decade the top position for
market share has changed considerably (see Fig. 1).
In the Feb. 1997 the Asahi News reported:
. . . Asahi Beer Company has become the top industry
leader by winning the market share over Kirin Beer
Company. Asahi Beer, which was the leader in 1953,
has made a comeback after a period of 44 years. While
Kirin Lager sales have stagnated, sales of Asahi Super
Dry have been steadily increasing. The difference in
performance between the main products is the difference
between night and day.

Figure 1.

Asahi Beer experienced a long period during which its

market share fell because the companys management did
little but to maintain its product. The marketing team did
not want to lose their loyal fans, so they didnt improve
the beers taste or label. In other words, they kept the
business going with the idea of selling only the usual
products to the usual customers by the usual staff and in
the usual manner.
While Asahi put strong efforts only into certain target
areas, Kirin established factories all over Japan and marketed its product countrywide. The difference in marketing strategy and factory geography made a big difference
in market share nationwide.
Although both Kirin Beer and Asahi Beer have been
popular over the years, in contrast, Suntory Beer was not.
How can we explain the gap between Asahi, which is
currently the most popular, and Suntory, which we dont
hear very much about? Why couldnt Suntory increase its
market share? What can it do to surprise the industry?
For the answers, lets take a look at the chart and graph
shown in Figures 2 and 3.
Figure 2 shows strategic characteristic factors (senryaku
tokusei yohinzu) and the levels from +2 to 2. Next, the
weight of the different factors were divided and when
added up equaled 50. The main characteristics of beer are
things such as taste, smoothness, percentage of alcohol,
bottle design and label, packaging and so on. These are
the major factors that make a big impact on market share.
Both Asahi and Suntory were rated for each of these factors. For example, Asahi Beer was graded at +2 for taste
(meaning excellent) and Suntory is graded +1 (meaning
good). A graph was created by connecting their respective points.
Lets calculate the scores of Asahi Beer. It was graded
+2 for taste, and the weight of the taste category is 5,
therefore +2 3 5 = 10 points. Asahi was also graded +2
for smoothness, and the weight of smoothness, in this
case, is 3. Therefore +3 3 2 = 6 points. After calculating
all of these characteristic factors and adding them up, we
find that the total score for Asahi Beer is +57 while Suntorys total score is only 31.
In Figure 4, the Cost/Benefit Chart, the horizontal
line (x axis) indicates the price and the center point
equals zero. Anything toward the left side is more expensive while the right side is less expensive. Because there is
no price difference in those products, customer satisfaction was centered (above zero). The final score for Asahi
Beer was +57; Suntory was 31. We then calculated the
difference between the two (+57 [31] = 88). Thus,
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Sugawara

Figure 2.
Suntory Beer must increase its customer satisfaction level
by more than 88 points in order to win over Asahi Beer.
If we go back to Figure 2, Strategic Characteristic Factors, we see the following weak points of Suntory Beer.
Suntory did not respond to changing customer demands,
nor did Suntory conduct a clear media campaign (Public
Relations). Suntorys company image was not defined
and therefore, not understood by the consumer. There
appears to be a lack of planning capability. So for Suntory
Beer to win this competition, the company must:
1. Sell products that meet the customers demands using an
understandable PR strategy.
2. Present newly developed products that appeal to the both
the media and customers.
3. Distinguish the brand name image of Suntory Beer from
the Suntory Whiskey products.

Figure 3.
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Figure 4.
CASE # 2
Market CompetitionA Larger Company Challenges
a Small Companys Market (How a company with
annual sales 50 billion tried to enter the market of
a small/medium-sized company with annual sales of
3.5 billion.)
Its often been said that sharks dont swim where tadpoles
live, but today it seems that the sharks will go everywhere to win market share. So, why is the use of the
Strategic Information Tool so important? You will often
see other companies entering the same market as your
own. The more attractive the market is to a competitor,
the more you can expect competition. The Strategic Information Tool is a strong weapon to defend against
market entry by a competitor or against a competitors
new products.
Company M is a client firm with annual sales of 3.5
billion with a profit of 2.2 billion. Its business is manufacturing and selling a small vacuum ejector (size 40 3
2.40 3 1.60), made of aluminum. It is highly profitable.
The market is very small, but Company M has more than
90% of the total market share. This device is used in the
automated assembly line in car factories to assemble
windshields. Using a unique vacuum technology, it picks
up the product like an octopus, then carries it to the designated spot on the assembly line.
Before this device was invented, car factories used a
big machine such as a vacuum pump, which cost 10
times as much as the vacuum ejector. Thanks to the
vacuum ejector, the customer satisfaction level for
Company M increased dramatically and the president of
Company M was smiling all the time. But just for
awhile. Suddenly, it was learned that Company Sa

Strategic Information Tools

major Japanese corporation with annual sales of 50

billionwas planning to produce and sell a similar
product.
The first and most important objective for Company M
was to change the mindset of its employees; every employee had to develop a sense of Crisis Consciousness.
Until that time, Company Ms employees had been able to
relax about the competition, and to concentrate on
producing high-quality products. [For example, a meeting was scheduled simply to discuss how to spend one
billion Yen (thats about ten million dollars)!] We thought
up the catch phrase Beware of the Wolf! to insure that
employees clearly understood that a crisis was approaching. Next, the meeting to spend one billion Yen was
changed into a strategy meeting devoted to countering an
attack by the Wolf, and the companys atmosphere
changed dramatically.
It was assumed that it would be easy for Company S to
make better products than Company M, because Company
S had excellent technology. However, Company M had a
big advantage in the areas of as research and information
about actual end-users as well as in the number of patents
which they had accumulated each year. The biggest concern was how to defend against Company Ss strategy.
This required a strategic information tool that could
measure the cost benefit correlation.

THE

BIGGEST CONCERN WAS HOW TO

DEFEND AGAINST THE RIVAL COMPANY S

STRATEGY.

THIS

REQUIRED USE OF A

Figure 5
tomer satisfaction, as we can see in Figure 5. Next, we
simulated where Company Ss strategic product might
come from. We estimated Company S would introduce
more than three models that would have higher customer satisfaction and lower prices than Company Ms
product A. Although it was very hard to simulate where
we should set Company S satisfaction level, we decided
to restrict this to the +50 level. Company M then made
the following Wolf Countermeasures Strategy based on the
above.
O

Set the customer satisfaction level above +50.

Reduce the price below 33,000, because Company S

would most likely set its price somewhere between
33,000 and 30,000.

Set the price as close to the cost price of the Company S

product as possible, and design Company Ms own
product with the goal of maintaining a benefit ratio of
more than 60.

Establish an information-gathering program targeted at the

consumer for utilization by the end users.

Insure that the Company M goal was to address

customers needs and to develop products with a higher
customer satisfaction level rather than trying to beat
Company S.

STRATEGIC INFORMATION PRODUCT THAT

MEASURED THE COST BENEFIT CORRELATION.

Two new Company M projects emerged from the Wolf

strategy meeting. The first was a project team designed to
simulate an attack on Company M by Company S. The
other was a project team to defend the firm against Company S attacks. Both teams operated separately and secretly. The defensive team made a simulation on how
Company S might plan its own strategy. The simulated
Company S project team (i.e., the offensive team), then
made a simulation of how Company S might invade Company Ms market. The two teams combined their respective simulations and created Company Ms overall strategy
(Figs. 5 and 6).

Creating the Strategic Information Tool

The price of Company Ms Product A was 35,400
(about $295.00 at US$ = 120) and this merits zero cus-

Company M adopted the above directives based on the

findings of the Strategic Information Tool, and began its
new product development. Two years later, the Wolf actually did decide to enter Company Ms market. Company
S introduced its first product (Product A) at 33,650
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Sugawara

to increase, but this did nothing to stop the growing

deficit.

AS LONG AS THE MENTALITY WAS RAILROAD

CUSTOMER SERVICE,
JAPAN NATIONAL RAILWAYS CONTINUED

PRODUCT INSTEAD OF

LOSING CUSTOMERS TO OTHER

TRANSPORTATION SERVICES.

Figure 6.
with a customer satisfaction level of +25. Three months
later, Product B came on the market at a cost of
31,400. The customer satisfaction level increased to
+48. But by this time, Company M had developed a new
product, with a rating of +80 for customer satisfaction
and a price of 33,000, which was very competitive.
The benefit ratio was also kept at about 65. Company M
succeeded by using this Strategic Information Tool in its
decision making, allowing it to become more competitive.

CASE # 3
Creating New MarketsDeveloping a New Market
from an Unknown Market Identity
When I ask company managers the question, What do
your provide to society? almost 100% of them reply
with the name of their products. For example, television
manufacturers and dealers simply say they provide society
with televisions. Companies whose managers have ideas
like this soon discover that their business is going
nowhere. Let me give two examples to illustrate this.
Example #1
The government-owned Japan National Railways used
to have a tremendous deficit. Its managers believed
that their job was simply to run the trains along the
tracks. Their deficit steadily increased in response to
this type of thinking, and they responded by raising
the fares. Management really didnt understand what
their business was at all. The commodities that they
transported (such as passengers and freight) continued

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Of course, as the Japanese economy grew, other transportation systems such as trucking firms, bus companies,
and airlines also grew, and they won customers from
Japan National Railways. The essential problem was that
customer satisfaction for Japan National Railways was
much worse than that of its competitors. It lost its customers to other transportation services because of antiquated management ideas. The mentality was railroad
product instead of being customer service, and this
soon lead the corporation to dig its own grave. After
Japan National Railways became the private company
called JR, its management finally recognized that the
goal of their job was to provide society with a transportation service.
Example #2
It wasnt so long ago that Japanese steel manufacturers had to
lay off 10,000 to 20,000 employees because they had concentrated only on producing steel. I believe the mission of management is to maintain employment. In order to carry out its
mission, management must produce jobs by creating new
markets. This is a fundamental management philosophy.
The steel industry has been recognized as the main staple of Japanese industry, hence, one of the most important of Japanese industries. However, management did
not clearly understand what it should produce in order to
maintain employment opportunities. If managers clearly
understood this concept, they could produce the main
industrial commodity in any given era.
Japanese steel industry managers neglected to develop
new markets such as semiconductor production. They
felt they had nothing to do with the electronics business.
This was a big mistakeit left the semiconductor business solely up to the electronics companies. Soap manufacturers, for example, also provide society with cleaning
products in addition to soap. Gas equipment manufacturers provide consumers with various conveniences to facilitate cooking. So too, the steel industry would have benefitted from a broader product range.

Strategic Information Tools

THE JAPANESE STEEL INDUSTRY NEGLECTED TO

DEVELOP NEW MARKETS SUCH AS
SEMICONDUCTOR PRODUCTION.

THIS WAS A

BIG MISTAKE.

Management Philosophy and New Product Planning

To create a new market, company managers must first
have a clear concept of what it takes to enhance customer satisfaction, the first step in the development of
product planning. It is natural for a company that sells
electric lighting to concentrate its efforts on electric
lights and related products, but this should be market development or product planning as viewed from inside
the market as a whole. It cannot be the view from inside
the factory. For example, how would the company that
sells electric lights and concentrates only on ultraviolet
light, develop a product related to water sterilization?
With the goal of satisfying the end users needs came the
prospect of providing safe and palatable drinking water.
This obviously couldnt be done by light technology
alone; it is very important to clarify this by establishing a
concept.
Here, the decision was made to enhance customer satisfaction by combining products from the fields of lightenergy technology and ceramic technology. This led to
the creation of a space simulator designed for space exploration. A new product plan for an air cleaner was then
developed based on the space-simulator technology. True,
there is now a big difference between this new product
and the companys existing products, but a new market

has been developed that increases the companys prospects

for growth.

About the Author

Tsutomu Sugawara is a recognized authority on the
application of Japanese Strategic Information Tools (Senryaku
Jh) to management and decision making. He specializes in
small- and medium-sized businesses and emerging
entrepreneurial firms. In 1974, he became an independent
consultant and has acted as advisor to numerous Japanese firms
including Ushio Electric Company, where he served as an
internal consultant, adviser for the development of management
techniques, and leader of the marketing group. He is a member
of the Association of Management Consultants in Japan
(Nippon Keieishi-kai). Mr. Sugawara was born in 1937 in
Karafuto (Sakhalin) in the northernmost part Japan. He is a
graduate of Tokai University, and resides in Saitama Prefecture
near Tokyo. Mr. Sugawara is currently writing Capture the
Market with Strategic Information Tools. His previous
books include Winning Through Value-Added Services
(Fukakachi de Shbu-suru), Handbook of New
Product Development Techniques (Shin Shhin
Kaihatsu-gijutsu Handobukku), Marketing Insights for
Development Technicians (Kaihatsu-gijutsusha no
Maketeingu Kaigan), Dynamic Management
(Dainamikku Manejimento), and Using Business
Strategy FormsA Simple Three-Step Process (Eigy
Senryaku Shiito o Tsukaeru Hon). Mr. Sugawara can be
reached in care of John Quinn, Quinn International, 929
Cup Leaf Holly Ct., Great Falls, VA 22066-1223 USA;
Tel/Fax: +1 703-450-7541.

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