Apple in Japan: Lessons Well Learned

by Virginia Kouyoumdjian

Apple Computer is a company that provokes a multitude of passions, ranging from utter devotion to cold disdain. Its demise has been predicted by critics with extraordinary regularity ever since its creation, while its successes have been treated by many as accidental. No doubt about it, the nay-sayers proclaimed: "Apple just could not last in the face of the bigger, the stronger, and -- most important of all -- the more serious."

And then there is Japan, one of the world's most interesting and most underdeveloped personal computer markets, yet one of the most demanding. Apple's history in Japan has been checkered, with the early years a study in disaster. Rumor has it that the US Department of Commerce once published a manual using the company as the ultimate example of how not to do business in Japan. Inadequate distribution of non-localized products at extremely high prices ensured that few Japanese consumers could afford, or would even want or be able to use, Apple's products. A considerable level of corporate arrogance did nothing to help the situation. It was only in the late 1980s that Apple decided to get serious about
Japan, and put in place a serious plan to conquer this market. Work began on localization of products, with Apple Technologies, an R&D opera tion, being set up in parallel with Apple Japan. Software developers were recruited, the distributor network was expanded, and efforts were made to increase (or rather, develop) brand awareness.

A huge leap in market share

The changes were dramatic, and so were the results. In the latest available figures published by IDC (International Data Corporation) Japan, Apple is number two in the Japanese market with a share of 13.4% in 1993. (Unofficial figures place the current share as high as 18%.) Not only is this a remarkable figure for a single foreign company in a high-technology field, it is the highest share for Apple anywhere, including the US (where it holds 12-13%, of the market). The 1993 figure is all the more spectacular in that it shows a sales growth of 75% over 1992, when Apple's market share was 8.8%.
Apple products are now sold through more than 50 distributors in over 3,000 retail outlets nationwide. The corporate logo has one of the highest brand recognition figures in Japan, with the "apple" itself becoming a real fashion item for many young people.

Localization continues to be one of the core elements of Apple's success in Japan. At this stage, it consists of making the full range of hardware products available in a Japanese platform and with adequate software support. In order to ensure the company's continuing success in Japan, a new stage will need to be implemented. Rather than taking products originally conceived for the US or other markets and localizing them for Japan, the fundamental needs of the Japanese market need to be examined, and products created to fill these needs.

Japan is the world's second-largest personal computer market, but it lags behind in many ways. The dedicated word processor has been uniquely successful here, and many potential PC buyers have stuck with these, not yet making the leap to a full PC.

A different kind of education market

Although Apple's current stronghold in Japan is the corporate market, the company remains strongly focused on the consumer and education markets. The educational market in particular has been a very significant one for Apple in many countries, but in Japan it remains limited and suffers from very different attitudes as to the proper use of computers in education. Progress in this area could mean that Apple's spectacular success of the last few years is only a start.

The education market is, in fact, where the company sees the biggest potential for growth. According to Hector Saldana, director of the education and consumer division at Apple Japan, "Apple's roots are in education, not corporate America. That is the most exciting side of the business right now, and wee see 3 significant growth in the ratio of education and consumer sales to total sales over the next few years."

The education market in Japan presents some interesting challenges. First, the influence of the government is heavy, since it provides both funds and directives to public schools. Second, there is a basic difference in the thinking behind having computers in the classroom. In the US and Europe, the idea is to use the computers to help students learn. In Japan, however, students mostly learn about computers, not through them. The teaching of BASIC remains ubiquitous in Japanese schools, and many students actually graduate able to program a personal computer but not able to use one!

Another interesting point is that, where computers are used, students are given much less leeway in how they use them. It is estimated that 80% of school computers are linked together through very sophisticated and expensive networks, giving teachers almost total control over the functions of every machine. In addition to hindering creativity, this philosophy also tilts computer-related expenditures heavily towards networking rather than applications software. The cost per computer in Japanese schools is among the highest in the world, and there are relatively few results to show for it.

Adopting a home-based approach as part of its strategy to adjust to local needs while maintaining high levels of growth, Apple Japan has done two significant things. The first has been to focus on the home education market, and the second has been to develop products that satisfy the network heavy approach adopted by schools.

Japan is a society in which parents play a strong role in the education of children, and the recent demographic changes toward fewer children has led to more parental attention and money For each child. By focusing on this market, Apple hopes to increase its share of the K-12 market in Japan from the current 50%;, to somewhere closer to the 50%, share it enjoys in the US. One interesting result of the emphasis on networks in Japanese school computing is that it has led Apple in Japan to develop an (as-yet unannounced) extremely simple and low-priced network product, one that will be marketed not only in Japan, but worldwide.. Thus, a possible stumbling block has been made into a stepping stone. This network product will not he restricted to schools; it will also have applications in business.

Although true multimedia is a relatively recent phenomenon, Apple has always given special attention to this area. The typical Japanese user is particularly attracted to multimedia capabilities. Apple will be able to further enhance its strong multimedia exposure through the fast, new Power Macs that use the powerful RISC PowerPC chip (developed jointly by IBM, Apple, and Motorola). Because of its strength in the field of consumer electronics, Japan is a natural center for the convergence of multimedia technologies. According to Dr. Wayne Surdam, director of product marketing and developer support at Apple Japan, "Japan is more open and receptive to innovation than any other country in the world."

PC market ignores recession

The Japanese PC market is still showing strong growth despite the economic slowdown. In 1993, sales were up 15.2%, over 1992, according to IDC, and further double-digit growth is predicted for 1994. Within this framework, Apple continues to grow. There is talk in some quarters of market share approaching the 20% mark by the end of the year.

Besides closing the gap between prices in Japan and elsewhere, Apple has expanded the range of machines available here. The Performa series, first marketed in the US in Septernber 1992, was not introduced into Japan until October 1993. Aside from time for localizing both the hardware and software, some of the delay was due to the differing segmentation in retail sales channels in Japan, requiring a tough decision about which sales route to use.

According to a survey conducted by Apple Japan and published in MacFan magazine, 85%, of Performas sold in Japan have been for home use, with 65% bought expressly for educational purposes. Only 5% of buyers had previously owned a Macintosh; 25% were transferring from a DOS based machine, and 65% had never before bought a personal computer. This underscores the foresight of Apple's decision to approach the educational market from the home rather than the school angle.

Power to the Macs?

As is the case elsewhere, Apple's products and markets in Japan are in constant flux. Fully localized Power Macs were introduced in April 1994, a mere two weeks after the US introduction, and even that delay was due only to a decision about optimum timing for product introduction. Apple's ability to launch its products worldwide, and the speed with which it has produced a complete range of desktop computers using the Power PC, gives it an increasingly competitive edge in Japan. Buyers here no longer feel as though they are getting the dregs of the company's creativity.

To the Japanese consumer who is extrernely interested in quality and performance, the sheer computing power of the Power Macs is likely to be extremely appealing. Added to this is the fact that over 95% of the software ever written for the older Macs will run on the new machines, albeit minus some of the extra performance of specific PowerPC-optimized Power Applications.

In the eyes of Apple, however, the Power Mac is not just a better machine -- it is a tool to open the way for a real revolution in way computers are used. According to Dr. Surdam, "The challenge is to break out of the traditional computing tasks, such as word processing and accounting, and use it as a means to do business, and everything from a communications tool that provides ready access to information to an entertainment center."

This brings us to the Japanese and computer communications. The Internet remains more the province of "technonerds" than of the average Japanese consumer, but Apple is hoping to correct this. Its E-WORLD online services are expected to be launched in Japan once they have been totally localized.

Not forgetting the average consumer There is little doubt that the future of personal computers lies in the hands of non-technology-minded users. Developments in multimedia and communications all have a very broad base of users in mind. The challenge is to find the right balance between stellar technology and the real needs of the consumer. Apple has always been ahead of its competition in terms of making its machines easy to use, and it has made a concerted effort to implement adequate localization. Now, with the Power Macs putting Apple PCs right at the top of the market in terms of speed and performance, the trick for Apple will be to keep that level of accessibility.

One of the ways in which Apple and some other companies (TBM, Novell, Oracle, Sun, WordPerfect, and Xerox) are looking to do this is with a technology called OpenDoc. The aim of this is to rid the user of ultrasophisticated versions of software filled with functions they never use. OpenDoc consists of application software "parts" that are built into modules to give the user exactly what is needed, and nothing more. This is rather like having the option of getting rid of all the buttons you never use on the VCR remote control but being able to recall them again in the future it you ever want them back. The fact that OpenDoc is also cross-platform makes it even more attractive.

Don't call us...

Unfortunately for those who experience problems, one area in which Apple has moved slowly in Japan is in providing users with direct hardware and software support. Even business users -- currently 60% of Apple purchasers in Japan -- do not have access to a service like the subscription-based Apple Helpline available in some other countries. Performa buyers receive a full year of toll-free support, but users of all other models are told to request support from the retailer or the dealer who sold them the equipment. This can be a real concern for anyone who has bought a computer through a discounter, since many of them boast that their prices are so cheap because they offer no service whatsoever.

The problem is compounded for bilingual or English system users; most retailers have no knowledge about English system software or applications. While it is possible to purchase English-language versions of system software directly from Apple Japan (for a price), that is the extent of the support -- which may be one reason why there are so many independent foreign computer consultants in Tokyo.

What distinguishes Japan from other countries is the slow development of its PC market, which was due in part to its very high prices until curly 1993. At that time, the combination of the recession, the introduction of DOS/V, and subsequent entry into the market of companies such as Compact and Dell forced manufacturers to rethink their strategy. The move has paid off for the industry in general, but the rewards have been particularly handsome for Apple. By continuing to focus closely on the particular needs of the Japanese market and taking localization one step further to Japan-based creativity, Apple seems ripe for further growth in market share.