 
Vol.22 : John Ermatinger (Gap Japan K.K.)
July 25, 2007
Niigata quake sparks calls for nuke plant safety review
Honda miscues delay Acura release
Markets prepare for coalition calamity
Writers embark on forestation campaign
Expanded coverage: Private sector must grab reform baton
khakis：カーキ色のズボン
headway：進歩
service requirements：サービス要件
reside：存在する
sales associates：店員
（ J: John, P: Peter ）
| J : |
When you think about the Gap brand, first, we are an American icon brand. We were the first brand to signal a shift in culture in the US and teach Americans how to dress casually both after work. What's changed over the last few years is the casual atmosphere has actually been embraced at work. And so the Gap mystique has actually carried on, not only in terms of the after work hours, but also is applicable for where to work as well.
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| P : |
Is that applicable nationwide in the US do you think or is it something that is more specific to - I don't know, people working in IT for example? |
| J : |
No, there has been a pronounced sea change over the last 10 years, Peter, in the US specifically. We used to wear a coat and tie 5 days a week and when the Gap brand showed consumers how they could dress respective to the work environment, it became a natural. People shed their ties and sport coats and they were able to wear sweaters and khakis and really nice pairs of jeans to work and it became acceptable. And, quite frankly, it's just more comfortable.
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| P : |
Do you see the same kind of change possibly happening in Japan? |
| P : |
To a smaller degree perhaps? |
| J : |
Absolutely and our Banana Republic brand, which is part of the Gap Japan family of brands, is making some real headway in that - this is a brand that has only been here in Japan for about 18-20 months, so we're fairly new with Banana Republic in Japan.
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| P : |
Is it that recent? I hadn't realized that. |
| J : |
Yes. Our whole premise in Banana Republic is really to share with both the female and male consumer that they can really look great with the assortment of products that we have for them, and that they can be comfortable, be professional, and its not only appropriate for the work environment but also when they go out after work.
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| P : |
Taste and clothes differ an awful lot from country to country, perhaps more with women's things than with men's things. And Japan has a very, I mean it has a unique look the young women like these days, which, I mean, my own daughter for example, when she goes outside of Japan to other countries, she finds a really, really big difference.
Now, for a company like Gap that is operating in multi-markets all the time, what do you do? Do you tailor your clothes for each market or do you - presumably you want to keep an integrated brand out there too, right?
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| J : |
What we do is, we take the essence of what North America provides us in terms of product creation. So we really take advantage of their inspiration and their direction. But one of the great things about having 200 associates here at Japan headquarters and over 5000 sales associates in our locations here in Japan - we are quite a local company in many respects. And so we're always taking that inspiration and we're twisting it and turning it and making it applicable and sensitized to the Japan consumer taste level.
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| P : |
So, the impression I get of service in retail stores in this country has changed quite a lot over the years. How do you see the level of service in Japan compared with, I don't know, say Hong Kong for example? Or the US? The US is going to be a lot different. |
| J : |
Well, I think it's very hard to compare Japan's service requirements with any other service requirements anywhere in the world. I think that the requirements here in Japan for service is so much higher...
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| J : |
...than anywhere I have ever experienced. It's one of the things we talk about often here. We have sales associates that have been in our system for over 9-10 years, some of them have been here since we've been here, which is a very, very fortunate asset to have, because of the service requirements.
And, we feel that it's a continuous improvement type of activity where those 4000 or 5000 sales associates in the store, we have to continue to train, we have to continue to encourage, we have to look for new and innovative ways to make them part of our brand.
A really good example of that is just a couple of weeks ago we ran a sales associate layering contest where we had 20 sales associates in 20 locations, set up blogs and they became stylists, and you could go on to their blog and you could see how they might put that dress together with a scarf or a jacket or how they would make outfits together.
And they became celebrities essentially because they were able to share with their customers and with customers over and above that, what the appropriate look was for their particular store. And then people would come in and ask for them by name and they became very, very famous. Actually, we recognized four of them as winners.
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| P : |
And this was through the website, so anybody could... |
| P : |
Access the blog and... |
| J : |
Yes. And it was fantastic for them. Like I said, it was - it's taking an asset that you see every day and that you depend on everyday and you encourage them to look at their responsibilities a little bit different and we provide them a little bit of assets and encouragement and it's amazing what the power that resides out there in our sales associate force. |
lore：言い伝え
work-life balance：仕事と生活のバランス
be better off：一層良くなる
（ J: John, P: Peter ）
| P : |
So, most of the people working for Gap Japan K.K. are Japanese employees?
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| P : |
How many non-Japanese are there? |
| J : |
We have about 17 total, so that's 17 out of roughly a little over 200 here at Japan headquarters and all of our sales associates and store management in the stores are Japan locals. |
| P : |
How many stores do you have in Japan? |
| J : |
Well, we have about 105 Gap locations and 20 Banana Republic locations.
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| P : |
Okay, and that is spread all over the country. |
| J : |
All over the country.
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| P : |
What does the name Gap mean? |
| J : |
Well, initially, lore has it that when Don Fisher started the business in 1969...
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| J : |
Yes, he was thinking of the generation gap. Now, he was a man in his early 40s, so he was really thinking about the younger generation and he was inspired by Levi's jeans and by music specifically. So, when he opened up the first store in 1969 on Ocean Avenue in San Francisco, which is, I have a copy of it for you, the store was actually famous for records, tapes and Levi's jeans.
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| P : |
So it wasn't a clothing store? |
| P : |
Levi's, records, and tapes. |
| J : |
Yes, and that's how we got started and these circles that you see are to simulate albums.
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| J : |
...we are dating ourselves now Peter, but, you know, we used to put on a big platter, you know,...
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| P : |
I still call everything records. That's interesting. |
| J : |
A matter of fact, my first week on the job, which was last year August, I started on Monday and that Friday we had a summer concert event, and we had local artists as well as artists from the US here, and we had a concert that evening with 5,000 winners of a contest that we had. And donations from that concert, because we actually sold t-shirts at the concert, went to help build two elementary schools in Cambodia.
So, kind of, going back to your earlier point around, it's more than just making sure we have standards in a country, we are actually looking for new and innovative ways to contribute back to those communities where we have factories and factory partners to participate in the community. And I think you referenced some product that you saw today at the Harajuku location, which is product Red.
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| P : |
Oh, those ones, yes, yes. |
| J : |
And that was made in South Africa. |
| J : |
Well, part of the profits from that venture, which is the 5-year commitment, will go towards serving people and communities in Africa to help fight and support AIDS awareness. |
| P : |
That was about that. Okay, I remember reading about that in the newspaper now. |
| J : |
And so Bono was here last December and he is a huge spokesperson for that effort and we are very, very proud to be part of that. |
| P : |
Okay. What was it they were doing in product RED, was there a new cell phone that was red or something? |
| J : |
Yes, Motorola has just introduced the new RED RAZOR... |
| P : |
Or maybe there was an iPod that was red as well. |
| J : |
And an iPod which is red. My executive assistant has a wonderful RED iPod which I appreciate through her. Armani is another local Japan partner that also participates. It's a great thing for the apparel community and the apparel business to raise our level of participation and involvement in community, not only in Japan which we are attempting to do well, but also realizing that we are a global community. |
| P : |
I've heard that your employees are encouraged to leave the office early on Friday. Can you tell me about this? It seems rather unusual. |
| J : |
Well, it's a little unusual for Japan, and to be honest its a little unusual for my team, but let me first describe what ‘summer hours' is. |
| P : |
Please do. Please do. |
| J : |
Instead of working from 9 to 6, which we all know in Japan nobody works from 9 to 6. It's usually 9 to 7, 9 to 8, 9 to 9 that's usually the itinerary. |
| J : |
We have to understand that it was only 10 to 15 years ago where the work week was actually inclusive of Saturday. So, we are pretty much a Monday through Friday working hours enterprise here, but one of the things we wanted to try this summer is to encourage employees to work from 8 to 5, Monday through Thursday and then 8 to 2 on Friday. |
| P : |
So, wait a minute, that's 9 hours times 4 is 36 plus 8 to 2 is six, so it is a 42 hour week. |
| J : |
The purpose behind summer hours is we really wanted to encourage employees to have some sense of work-life balance. We felt as a US-based company doing business here in Japan, it's something that we could show the way, that we could encourage, that we can break a few rules if you will, and that we could put a bit more encouragement around a healthy worklife balance, and have [to] our employees advantage, a Friday afternoon to spend with their family or to go to a park or go shopping or whatever makes them happy.
And I have admit, some people look at this and say, well, that's really strange and what am going to it with the time, I'm going to be lost, and who's going to do my work and all the reasons why we he can't do it.
But what we are saying here is we need to find a way to be productive during the time we are at work and we need to squeeze out the non-value added work and the things that take too much time and don't really provide benefits to the company, and tried to squeeze our work days down and be really productive the time we're here, but free up some mind space so you can go out, and you can enjoy life a little bit.
We believe, and we honestly believe - I have experienced this over 10 years, because we did it at Levi Strauss & Co, that employees, once they embrace a little bit of work-life balance, they find they are much more productive the time that they are here, they find that their energy level and their motivation and their enthusiasm is greatly enhanced by taking a little bit more time for themselves.
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| P : |
How long have you been doing this in Japan now? |
| J : |
We've just started it last Friday. |
| P : |
You just started, oh really! |
| J : |
Yeah, tomorrow is another day, so we are really optimistic. Let me just say this, I have one example which made it all worthwhile for me. I have received an e-mail from one of our team members on Monday who said, “You know, I was able to bathe my newborn son on Friday afternoon and not only did it make me happy because normally I can only do that on the weekends, but it also made my wife happy because I could spend more time with her.” |
| J : |
What more can I say, right. |
| P : |
Yes, absolutely. That sounds great. It would be really interesting to maybe come back in 6 months and see how everybody is adjusting to it because I am sure for a lot of people it will take a little time to adjust. |
| J : |
It will, but Peter, I would be overjoyed if people came back after this experiment and said, “John, we want to do this all year round.” I think it would be fantastic. I think the company would be better off because I think that our employees would find ways and would actually encourage management to weed out some of the unnecessary work that we do Monday through Thursday and that I really believe, especially in this business where there is so much combination of art and science that the head will be clearer, the enthusiasm will be regenerated and the batteries will be fresh. |
 Tom Wedgwood / Brand Ambassador
Waterford Wedgwood Japan, LTD 
Vol.21 : Charles Duncan (Continental Airlines Japan)
July 18, 2007
Parties pull out all stops as zero hour approaches
Market convinced of August rate hike
E-money firms duke it out
Automakers envision vehicles of the future
Expanded coverage: Aquatic environments given fresh life
carrier：航空会社
Cancun：メキシコのユカタン半島先端にある保養地
connecting passenger：乗り換え客
niche：特定分野
（ C: Charles, P: Peter ）
| P : |
Where does Continental fly to, out of Tokyo or out of Japan? |
| C : |
We have a really interesting business, and I think a very unique network here. You know, unlike anyone else, we actually serve eight cities in Japan and we are very proud of that. You know, in fact no other U.S. or European carrier comes close, you know - most would fly to, you know 1, 2 maybe 3, you know the big three cities.
And you know, so for us we fly from Sapporo in the north and then Sendai, Niigata, Narita and then Nagoya. We don't serve Osaka, interestingly enough, but we do Nagoya and then Okayama, Hiroshima and Fukuoka are the eight. And so for all eight of those cities we fly to Guam, which is, you know, our Asia hub and base and you know Guam is a huge destination for the Japanese market. I tell people from the U.S. that it is sort of like Cancun to Americans. In many ways, it is the first international trip a Japanese person might take, you know, the nice hotels, the short flight, there is no time difference, people speak the language, it's safe.
You know, so essentially it is the first place you go and what we are trying to do from a marketing perspective is actually even broaden it up a bit further such that it may be your first trip, but then you can't change the geography and the convenience and so you can take your family as a professional and what-not and do - just, you know weekend, even two or three times a year.
So that's really our main business, and I should say that you know Guam is our hub, and, so beyond Guam we fly to a lot of destinations - we fly to Bali, Indonesia and Cairns, Australia and we fly to the Philippines and a lot of smaller islands in Micronesia, Palau, Pohnpei, Saipan, you know, various points.
And so we fly from these eight cities in Japan to Guam and then 70% or 80% of the people get off in Guam and again that's the main destination, we are also serving a lot of other points as well. And it's a lot of fun, you know, and for that business I end up traveling every week to one or two of those cities generally within Japan.
I quite enjoy that, just getting, you know the local foods and culture and customs, and there we have a great sales team that does great stuff in all those cities, and we get involved in the communities. And so I feel like we have really deep roots really throughout the country.
We have been here, this October is our 30th anniversary of service in Japan and when you look at the cities, you know, we have a long history. You know, it's 25 years next year in Nagoya, 20 years this year in Fukuoka, back in June we celebrated, and many of the cities are 17, 18 years, you know, a very, very long history throughout these markets and that's really kind of our core and our history.
Beyond that, 9 years ago in '98 which was also when I moved to Tokyo, at the same time we launched our Narita service to both New York and Houston, and so that's also become a very big business for us - Narita to Newark Liberty Airport in New Jersey, but very close to Manhattan and Houston and Houston.
Both of these are hub airports for us, and we have a lot of connecting passengers in Houston. Latin America, for example is very big. Mexico, we have 32 cities in Mexico, I believe, every Central American capital and most of the main cities in South America. So Buenos Aires and Lima, Sao Paulo and all these points, you know where Continental has really the best schedule in the market or one of the best.
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| P : |
That's interesting because I think a lot of people are probably not aware of that. |
| C : |
No, you are right, people who go tend to find out and one of our biggest challenges in the market is that, you know, we are not huge, we don't have limitless funds. And certainly the local Japanese carriers do have massive marketing budgets, and so you know they can plaster the city with billboards and trains and what-not, and so we tend to be very tactical and very careful in how we spend what limited funds we do have to get the word out.
And so what we - the things we do, for example, we've sponsored a tango dance competition that Japanese would attend, but you know that market will go to Buenos Aires, you know, and we have the dancers to do tango.
You know, and so we try to do very just, you know, shoestring types of things to be honest, but in all of our cities. You know, a good example in Niigata we are an official sponsor of the J-League Niigata Albirex team, and they actually every spring do their spring training camp in Guam, and so they train down there.
And it's, awareness is really the key everywhere, and so what we like to do is we - last year when the team was returning from Guam of course there are media on the airplane, there are media at the airport, and 'meet the team' is a really, really big deal in this little city.
And so we actually had Miss Guam and a whole team of musicians from Guam accompany the team, and so we actually got more media coverage from that. You know, in fact, we had our captain present flowers to make a ceremony at the gate when they left, with Miss Guam all the way back and then Miss Guam spent the whole weekend in Niigata, essentially just doing, shows in travel agencies, handing up leis, passing out flyers, doing media interviews.
And so it gets us airtime, you know, and publicity that we couldn't afford to buy quite frankly.
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| P : |
But do you find it has a direct effect on your sales? |
| C : |
Sure, you know, of course it's very difficult to measure directly. But absolutely, I mean, just little things like that, because again we just can't afford to buy the advertising on our own.
But we are willing to invest our time and our effort in our people, and we do things, you know, just very niche, very specific marketing-oriented programs in all of our cities as well and we really have, within the eight cities we serve, we think of this as 10 different marketplaces.
So, eight cities to Guam, and Narita service we also have to the U.S. mainland, and then Nagoya; we also fly to Honolulu and so within those we have 10 different very distinct markets, and we have a marketing plan for each one. And really I mean our competition is different in each city, and so we have to approach them differently.
But, you know, what's great about the business model, I like it so much, is that when you go to Sendai or you go to Hiroshima or these other points, we're the only airline that flies to a resort destination. There may only be two or three airlines that fly internationally and it would typically be to China or Korea or Taiwan, we're the only one flying to a beach.
And so we actually have really, really loyal customers there in those cities because they might fly to Guam this year, and then next year for vacation they go to Saipan or Palau or Bali or something and so we actually get them, you know, every time they go on vacation.
Which is really great fun and again if you are in Sendai, if you don't fly from your hometown airport (and we call ourselves the hometown airline), if you don't fly from one of these places your next best alternative would be Narita. But that is a 2-hour trip from Sendai to Narita and then an hour back, you know, to Tokyo Station, an hour from Tokyo Station to Narita and the cost of the rail would be 25,000 yen or so...
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| P : |
Plus you've got to wait. |
| C : |
And you can actually be in Guam in 3 hours. It is only a 3-hour flight.
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| C : |
And so to the extent that we can actually communicate that to people it's sold, you know, it's already done. But that really is a trick of just raising the awareness and marketing it in, by being in this business for a long time, that certainly helps, but it's just a lot of fun. You know, there is a long history; I've been here and I have just a great job, I enjoy it everyday, I am covering each city, and we are just in a very unique position in the marketplace.
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provincial cities：地方都市
short-haul flight：短距離飛行
percolate：浸透する
（ C: Charles, P: Peter ）
| P : |
It is interesting you get to travel to provincial cities in Japan as well because most people in the sort of job you're doing probably wouldn't have those...
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| P : |
...opportunities either. |
| C : |
Yeah, yeah, I feel good. |
| P : |
Most of your flights from Japan anyway, as you said, short haul, that is three and a half hour flights typically. So perhaps it is not the same as if you are traveling from Japan to the U.S. or to Europe, but for in-flight entertainment for example, if you have a lot of Japanese customers, do you, for example, select music channels or movies or whatever that the Japanese customers are going to prefer? |
| C : |
Absolutely, and it's very, very, very important for us, and even for short-haul flights we are very focused on that. I mean in fact for the short haul, just start there, you know, it's a three or three and half hour flight, but 90% to 98% of the passengers are Japanese.
And so even though we're a U.S. airline we really do focus on being Japanese in our service and in training both - I mean at every step of the way, at the airports, you know, on the Guam side focused on Japanese, you know, just cultural sensitivity and what the preferences are and, you know, newspapers.
In fact you know it's a similar flying time to domestic U.S. and if you look at the U.S. domestic market in particular they are taking everything off the airplane, it is almost like a Greyhound bus in a lot of ways but Continental is the only airline that has meals at mealtime, and we, you know, have free in-flight entertainment and we have pillows and blankets, I mean they are simple things but our competitors don't offer that stuff.
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| C : |
We do. And you know even on these short flights, from Japan to Guam, and again, it's a pillow, it's a blanket, it doesn't cost us a lot but I mean if you are looking and trying to save every single penny, you know, that's all been cut out since 9/11 at our competitors, but we still have it in place.
And so you know we are very, very focused on being high service and you know as comfortable as we can for the Japanese customer. But you know you are also right in the longer flights it's even more important, and we're doing a lot to localize and be as user-friendly for Japanese as we can.
I mean a few examples I can come up with for our 777 aircraft, which is really our flagship: we are putting in a new entertainment system, and we have 20 of those aircraft and two of them have it. And we are putting them in for the other 18 as quickly as we can - a new system that has 250 movie channels as well as, I think, 60 TV channels plus videogames and there's also a Berlitz Language Course.
And you can actually study a language, you know in your native tongue, sort of on a matrix. I think it is a 90-minute course to get just a basic, you know, touch-up on the destination where you are flying to. But the point is within that 250, what's really interesting and what is great is in the old system we had only 12 channels. And so you know we would have 8, perhaps 4 primarily in English, and we might dub the Japanese that's available and one or two channels for Japanese, and that will be about it.
But with 250 we will have, you know, and we do have a ton of content in Japanese, but then we also will throw in every other language you can think of, with one or two channels because there might be, you know, I don't know, like someone from Tel Aviv who speaks Hebrew and so we will have one or two channels in Hebrew, you know.
And any language you can imagine because we are such a global company and you never know where people are coming from, so you know. Thai, certainly Korean in this part of the world and again a lot of Latin Americans, so Spanish and Portuguese will be in there as well. So, we do that and then one other thing that is really, really great and we have gotten good feedback on is our kiosks at the airport where customers check in, the sort of computer box...
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| C : |
You know and in the U.S. all of our airports have it, we are bringing them out internationally in many, many places. For those boxes, they have only been in English up until now. But actually now we have just been putting in as quickly as we can multiple foreign languages, and we have 12 including Japanese.
And we get great, great feedback in that where they - you know for example, when you have a Honda engineer who is going to a plant in Alabama, and there is just no way in Birmingham, Alabama that the airport staff will speak Japanese, but that engineer who may not speak very good English can go to the kiosk and check himself in and view...
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| P : |
And there will be a button on the screen says "Nihongo"? |
| C : |
Actually, a flag, the Japanese flag. |
| C : |
And, so you try to just have - and make it as user-friendly as possible for all the languages so that we can actually take care of a person. So that even if we don't have staff on the airplane who speak Japanese, when you are flying from, you know, New York to Europe, you could still on the airplane have a movie in Japanese, help yourself at the airport when you check-in in Japanese, and not just Japanese, but Chinese and Hebrew and Portuguese and other language as well. So, we really are a very, very global company.
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| P : |
Presumably those kind of decisions are coming from the head office in Houston? |
| C : |
From our headquarters, absolutely. But really our international growth, we are the most international airline of the U.S. Carriers. We are almost 50/50 in revenue terms, U.S. domestic and international, and we actually serve more international cities than any other airline of the world I believe, and certainly among the U.S. carriers just international points on the globe.
And so we are very, very global and that has really been part of our strategy for the last 10 or 12 years, and so you're right, I mean, you know it has been planned from our headquarters, but within that because the Japan market is so important and really quite large for us, Japanese is going to prioritized and moved towards the top.
You know, Spanish would really the very first foreign language because especially in Texas and other points where we are strong, you know and we have a big network in Latin America, but generally the second language we do is Japanese as a company.
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| P : |
What about Nikkei Weekly? You've been here for fairly long. I presume you are acquainted with it? |
| C : |
Of course, I am. And I enjoy reading it a lot. I mean I must confess I don't read it quite every week, but I would say two or three times you know a month, so over half the issues I do pick up and read, and find it really, really interesting.
I mean, especially even when I was in business school in the US having recently left Japan. I then, every week went to the library to find it, because I just wanted to stay in touch with the country, and I think between the political analysis, business news from Japanese companies in particular, and even the new products and gadgets, that area I find really interesting, not so much as a consumer, but to know what ideas are percolating from the companies here and what markets are sort of being sought and pursued.
Because, yeah, I think a lot of innovation still, you know, comes from Japan, consumer demand is here, and, as well as the companies thinking of themselves. So I've been, about 10 years, a pretty regular reader of The Nikkei Weekly.
|
John Ermatinger / President
Gap Japan K.K.
Vol.20 : Terry White (Amway Japan Ltd.)
July 11, 2007
Hard-pressed, Abe ties fate to resolving pension fiasco
Strong sentiment backs rate hike speculation
Citibank Japan back in business
Automakers hit by slack domestic sales
Expanded coverage: Aircon makes school so cool
distributor：販売業者
Independent Business Owner：独立した事業主
direct selling：訪問販売
（ T: Terry, R: Russell ）
| R : |
Japan is obviously a big country and Amway is big in Japan - could you give me a little bit of an idea of the scale and scope of Amway's operations here? |
| T : |
Okay, we have been here now for nearly 30 years. And in fact Japan was one of our first offshore markets after Australia and the UK. Interestingly we went to Australia first because America and Australia spoke the same language, so if they made a mistake it wouldn't matter to the Amway business, but we came here and since that time we've much pretty grown steadily.
Last year, our sales were around 110 billion yen and we have around 680,000 distributors here as well as something on the order of 260,000 Kaudake club members, they are people who just want to buy our products, don't want to have an Amway business. So if you add that together, that's in the order of 1 million people.
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| T : |
Yeah, like one in every 13 people you meet has probably got a relationship with Amway.
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| R : |
Incredible. And is the Amway business model the same in Japan as it is worldwide? |
| T : |
No. In fact the business model is different from pretty much country to country. Here in Japan it is not anywhere near the same focus on what we call business tools, so the videos and the cassette types and the books that people are used to associating with Amway businesses we don't allow here and that's always been the case. But apart from that, pretty much the product range and the way we reward our distributor network is pretty much the same as elsewhere.
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| R : |
So those numbers you gave me were pretty overwhelming in terms of the total amount of sales and the number of distributors. The number of - are they according to independent business owners, as they are in the United States? |
| T : |
We use the word in Japanese we say distributor, because that's the word we've always used.
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| T : |
If we were having a conversation with our colleagues in the United States we would say IBO - Independent Business Owner and then that number is 680,000.
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| R : |
680,000 of those and then you have also people who are member of the Amway club who are just interested in Amway products and services. |
| R : |
So why do you think Amway has been so successful in Japan? |
| T : |
You know Japan is the world's biggest direct selling market. And some statistics I saw in a magazine that they sourced from the ministry, from METI - Ministry of Economy, Trade and Industry showed that something like 21 million people had some connection with direct selling here in Japan.
Whether it's the Pola range of cosmetics or MIKI Prune or any one of them, why is that so? I mean Japan prides itself on the village concept and tight community structures, everybody knows everybody else and if you look at the history of post Edo-period, Japan, the growth of private enterprises has been around that door-to-door sales type. |
| R : |
Personal recommendations, personal relationships with people. |
| T : |
Yes, very much. Toyota used to sell cars by people knocking on doors. Insurance is still sold door to door and if you look at statistics, Japan ranks the highest in terms of - I am sorry let me take that back. If you ask people what influences your decision, more than 60% of people in Japan say it's 'people like me'.
So the personal recommendation as you say and some degree of informed decision making is pretty unique to this marketplace. That's why we have so many distributors. |
| R : |
To match all the different people... |
| T : |
Yeah, and in that bunch of distributors there's people who like to sell a whole lot of product and there are people who just the product for themselves and their family. So as a business model across the 700 odd direct selling companies that are registered in Japan, it's pretty well known to people.
The unfortunate side of it comes around that's happened to us in about 10 years ago is when people try and push the system too much and in that circumstance, we as a company have to be very, very careful, one, to maintain our integrity, two, to protect our reputation - integrity is important to us.
And what we need to do is control the distributor...he gets excited about what the business opportunity represents and so over the last 10 years, we have been very, very careful about how we managed that, how we educate and train our distributors given the information that they need so that they can effectively recommend products to their friends and people they know.
|
| R : |
You said that some of your distributors are quite small and some are quite big as a multilevel marketing organization, could you give me an idea or how that small and big might... |
| T : |
Big could be tens of thousands of people in an organization, so 1% sponsors another person to join in the business who sponsors another one who sponsors another one and...
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| R : |
So lots of levels there. |
| T : |
Yeah, and our structure is infinite, so that you can sponsor as many people as you like, we don't want to see that get out of control, we also don't want to see people build a business, 'When they want to take Amway as a business opportunity' built with too few people, and some of the people who have been in our business here for 25 years or more, obviously over a period of time have created organizations that are huge. And in fact one of the world's biggest distributors is based here in Japan.
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| R : |
One of the world's biggest is based in Japan. |
| T : |
Yeah, and that man travels all around the world because he's sponsored people everywhere. He was recently in Brazil and recently in India and I mean for him it's a global operation and he just has huge charisma and appeal and has been very successful.
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logistic infrastructure：物流基盤
CSR initiative：企業の社会責任の先駆け
self-expressive：自己表現
eat-your-lunch：打ち負かされる
（ T: Terry, R: Russell ）
| R : |
So over the last 30 years or so, what changes in the business environment have affected Amway the most, I'm thinking here of things like the internet, mobile phones and those kinds of regulations.
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| T : |
I think to answer the last part, first the regulatory environment, Amway as an organization, as a company we want to respond to the regulatory environment and we want to be a positive player in that space. So at no stage, would I ever characterize anything that the regulators have done as being a barrier to our business.
In terms of the internet and mobile telephony and those sorts of things I mean it's a huge change and currently our digital sales would be in the order of 40% of that $1 billion, higher, edging up towards 50%, which makes us one of the largest internet trading companies in Japan.
|
| R : |
That's astonishing. I mean does that mean though that those sales are going direct to Amway HQ rather than through distributors? |
| T : |
No they are going, they're orders that distributors place...
|
| R : |
So the distributors place, I see, and then they are still selling directly when they are buying... |
| T : |
Absolutely - our job is to power the distributor network, but our internet site which we are currently doing some work on and our mobile site and at the end of each sales month are just overwhelmed with huge volumes, $10-$15 million worth of sales in a day. And we've put a lot of time and energy into that space because we realize that's where the society is going.
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| T : |
And the most important people to us in one sense as the communications people, our audience is the people who have yet to join our business. How do you respond to the needs as they are changing out there in the marketplace? We are in Shibuya, what way the young people walking up and down the street, how are they communicating and how are they aggregating their information?
So we have spent a lot of time and energy in that space, we'll be sending more time and energy globally in developing our capabilities and we hope to be doing some really innovative things over the next 12 to 18 months to reach out to that bunch of people who communicate in a different way than their parent's generation. I think the other thing that's really impacted our business over the years has been Japan's extraordinary logistic infrastructure.
In Japan, we can probably get a product on the phone line on and probably the main, okay we can get a product to the people within 48 hours.
|
| R : |
It's incredible, isn't it? |
| T : |
It's huge, and that means that your customer satisfaction levels are much different than they are in other markets, and when you think about it, it means that the products are touching so many different people. And the businesses are touching so many different people. That it can become for us and is for us a sense of - a point of pride. The other thing that we have learnt being in Japan over the last 30 years is that it is very important to give back to society.
And the way that Japan approaches corporate social responsibility or the CSR phenomenon is something that we as a corporation globally have learnt a lot from. On the basis of - on the back of that learning couple of years ago, we set up an organization called the One by One foundation for kids and what we want to do is globally impact the lives of kids everyday and we don't want to do that through huge grant-made programs or by large gala activity, we mean one by one.
So you'll see our employees volunteering to go and do things, our distributors would turn up to support the Special Olympics. We sponsor activities in nature forests and all of that in order to touch the lives of children one by one around the world
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| R : |
So that's Amway's main CSR initiative in Japan? |
| R : |
In Japan, or worldwide? |
| T : |
Everywhere. What we decided to do was if we are going to have a CSR initiative let's make sure that we are all in sync with one another and that we are able to do something that made a difference. We learn a lot from what Avon was able to do with the breast cancer and the pink ribbon campaign.
And companies like ours should do things like those. And the families that own our company seriously and honestly believe in the role of a person in giving back to community. So it's not something we do to attract attention. It's not something we do for PR.
|
| R : |
It's actually a natural instinct... |
| T : |
Yeah, we do because it should be done and we're very proud of the fact that our employee base of nearly 580 employees are actively involved in these sort of programs all the time.
|
| R : |
So you've got your direct employees involved and you encourage your distributors to be involved at the same time? |
| T : |
Absolutely, if we can bring one thing to a community activity in Japan, it's the large number of people who are in our network and what's most important in community-based activity is time, giving time to somebody who needs it, particularly with kids and in that context we believe that what we can give that few other organizations can actually apply is the number of people.
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| R : |
Well its great to hear about Amway doing that. I would like to move on to one other question. If you could just very briefly summarize this, the differences between market conditions here and let's take as an example America or if you prefer Australia... |
| T : |
I think that the United States and Japan are very similar in terms of market demographics and market issues. I think there is a bit more diversity in the United States. |
| R : |
When you say market demographics, the type of people who become distributors in Japan are demographically similar to. |
| T : |
Reasonably similar. Their level of education is typically higher, but that's - our distributors in Japan look like people in Japan, and our distributors in the US look like people in the US. So that when you think about the numbers that are involved, you would expect that. |
| T : |
I think in terms of market conditions, both United States and Japan are very mature markets for us, the challenge is to innovate, the challenge is to become consumer focused, the challenge is to become performance driven in a way that we've never been before in order to create new value in a whole range of different places.
And the way that you do that in the two markets is intrinsically different, that's why most of the people who work here at Amway, Japan are can you believe it, Japanese. Most of the people who work at Amway Italy are, Italians!
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| R : |
People who look like Italians. |
| T : |
There's a reason for that and instead a direct selling company like our own or many of our colleague companies in the industry reflect the cultures and the communities that they are part of, and if we don't respect that and indeed honor it, then we wouldn't be very successful at all.
So our challenge is those three things going forward is to retain the innovation, we have great R&D and we have made some great acquisitions in terms of IP. We now need to actually monetize that model a bit better than we have been doing and reflect it in the way we go to market.
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| R : |
How about the competitive environment, is it tougher in Japan? |
| T : |
In terms of products or in terms of the industry? |
| R : |
In terms of the industry. |
| T : |
Industrywise we are the biggest suppliers in Japan, we would battle with some of our competitors' market by market as the largest, but typically we probably are. In some places around the world, notably South America, people eat your lunch everyday and we don't do very well there at all. I think because direct selling is a mature industry here in Japan and it's becoming more and more understood. I think the marketplace is relatively stable. |
| T : |
The issue is around the products. Do you want to think about cosmetics and skincare, the first names that come to anybody's lips are Shiseido, companies like that that are just wonderful companies that produce outstanding products and have superb reputation being able to be in a marketplace with companies like Shiseido is really a plus for us. Our market share is small, but the quality, this demand that is in the marketplace means that we have to go on and continuously improve what we do. |
| R : |
So how would you like to see the market for direct sales, organizations like yourselves developed in Japan and how do you think it will? |
| T : |
I would like to see 125 million distributors but that's not going to happen. I think what I would like to see is, as we trend towards a social media environment and Web 2.0 becomes much more of a reality and Japan is one of the leading countries in the world in that sort of space.
What I see is a network of highly-enabled individuals who make very definite lifestyle choices. And the strength of the LOHAS movement and the lifestyle movement here in Japan I think is a wonderful indicator of the possibilities. I mean Mixi is the largest community site in the world.
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| T : |
And the way that podcasts and other things have taken off here is an incredible stimulus to us... |
| R : |
More blogs are written in Japanese more than in any other language. |
| T : |
Any other language and you know that Americans really dislike that, but it's true. And I think as we look around the region, I mean mobile this is a mobile community in terms of its computing power. The platform has become ubiquitous... |
| R : |
Right, the mobile internet has been in Japan for such a long time and people are thinking now this is a great new revolution in the states, we have had it here for years. |
| T : |
We can do stuff on our mobile phones that we can't do on internet sites in most countries and that's an incredible thing. So more power to it as young people become more accustomed to those social media environments and as Japan moves to that Hodan Sakai [ph] that self-expressive society. |
| R : |
Finally Terry are you familiar with the Nikkei Weekly? |
| T : |
I adore the Nikkei Weekly. I read the Nikkei newspaper everyday although I don't read the evening edition, I have to say it's - I just... |
| T : |
Well I just get home and I am full for the day. But the Nikkei Weekly is a great summary of some wonderfully deep analysis and some really well positioned commentary that people in our sort of walk of life need to be able to access.
And when I am in the United States, I will read the New York Times and the Wall Street Journal and I subscribe to the Financial Times and as well as the Nikkei and what it does is that gets our head around issues that matter.
And as a business and as businesspeople unless we are focused on business - on things that matter, then what we are doing is writing a retirement plan rather than a business plan.
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Charles Duncan / Managing Director
Continental Airlines Japan
Vol.19 : Frank Foley (HIT Entertainment)
July 4, 2007
Shareholders reject record number of activist motions
Court OK's Bull-Dog's takeover defense
Toyota, Matsushita getting cozy
Wedding styles change with times
Expanded coverage: Wedding styles change with times
holding company：持ち株会社
private equity company：非公開株式会社
shot in the arm：後押しする助けとなるもの
USPs：独自のセールスポイントを持った提案
（ F: Frank, R: Russell ）
| R : |
Okay. I am here today with Frank Foley, who is the General Manager of HIT Entertainment Japan. We are also surrounded by penguins, and trains. Frank, in Japan HIT Entertainment is probably most famous for Thomas the Tank Engine... |
| R : |
But in fact there are a number of other properties which are equally famous such as the Guinness Book of Records, Barney and other characters such as Bob the Builder worldwide, which HIT Entertainment is involved in. Could you give us first of all the background to the company worldwide? I mean tell us a little bit about your operations in Japan? |
| F : |
Right. HIT is actually it's a collection of I think 72 companies altogether. HIT is really best described as a holding company. We specialize almost exclusively in pre-school product. Guinness World Records is one exception.
HIT originally did a lot of documentaries and non-children's programming as well, but about 2 years ago, it was June 2005 it was bought out be Apax, the European-based private equity company. And Apax looked at the whole thing and they decided where the assets really are is in pre-school. So they sold the rest off.
Actually the previous management board got the rest of the business and still continue to run it, and we specialize in pre-school. They did keep Guinness World Records, and I think you know what that says is, you know, when private equity firms buy companies, you know what they are looking for is unreleased value and they try and put in the best team to create that additional value and they move on.
And so I think they saw that Guinness World Records is just too attractive to that goal. So that was the one exception.
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| R : |
Right, otherwise focused on pre-school? |
| F : |
Preschool exclusively...
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| F : |
Worldwide. As you said, Thomas is a massive character and that's strong in almost all markets we are in. Otherwise it breaks down to market by market there, somewhere one character, one brand or another is strong.
For example, in the US, Barney is very, very strong. It's 20 years old now. Next year is their 20th anniversary I think in the US. And product has got a big - the brand has got a big shot in the arm from that and will continue.
What's so great about this job is Thomas basically. It's working with a brand that has 100% brand recognition, everybody loves it, it's not about how do we sell this thing in this market, it's about how do we prioritize. And that's... even Fox is an extremely strong brand, National Geographic is a very, very strong brand but in Japan there are challenges in really getting to the mass market of those brands.
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| R : |
Right, everyone who you need to know about Thomas, the Tank Engine already knows effectively. |
| F : |
And actually Guinness World Records is the same.
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| R : |
Right. So, but you said Thomas has been popular in Japan for about 10 years. HIT Entertainment has a whole range of different properties, Bob the Builder, for example. Surely one of the challenges for you now is to do the same with Bob and Angelina Ballerina, I believe, as has happened with Thomas? |
| F : |
I think Thomas, it's a little longer, it's may be 12, 13 15 years or so. It really picked up once it got on Fuji TV and the market really expanded from there, and its grown to - now the number preschool brand in Japan and after Anpanman, and that makes it the number one foreign preschool brand in this market and that's a huge success, that's great and yes there is pressure on us to build other brands.
The other brands that we work with are Bob and Pingu, they are sort of the - with Thomas, they are the three brands - three main brands we are working with, and as you mentioned Angelina and there are some other smaller brands as well that we do sell the stuff with, but the real focus is on those three.
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| R : |
And the best way to prioritize how you license the rights to those properties in terms of keeping those properties in the public eye and obviously bottom-line, making as much money from them as possible. |
| F : |
I think you know they are all at different stages of development, and they are sort of slightly different properties as well. So it's a different task with each one of them. Thomas is so big and so well known, I mean the retail value is public knowledge, it's somewhere around 350 million US retail for Thomas.
So that's sort of, that's one task. Pingu is a growing brand for us, it's a brand, its USPs would be it's a family brand, it's got a very wide demo, all the way from infants through to mothers, OLs, and the sort of range of - there is a sort of a unique range of products, categories that you get out of that, because that's who are selling to.
Bob is something that's very strong in some areas. It rates very well on television, DVDs sell extremely well, apparel does really well, but toys, we've got a challenge on toys, so that's the focus on Bob. So each one has its own challenges and its own strategy that's driving it.
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kid slots：子供番組枠
the be-all and end-all：最も重要なもの
vernacular：専門用語
（ F: Frank, R: Russell ）
| R : |
So describe the market in terms of your competitors? So we have a number of companies who have foreign-originated properties. Obviously Japan is a huge market, world's second largest economy, they like characters, what's the key to success would you say in terms of being able to bring a foreign property here and make it successful?
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| F : |
I think in our area, in the preschool area, you are selling to kids, so kids have to like it. And that's really where it starts and finishes. And that's driven by Television, so you've got to get on Television, so there is a bit of a, there's a B2B challenge there in convincing them to put it on Television, and that's very, very difficult.
Most of the commercial networks now have dropped their kid slots, and there is no regulatory requirement on them to broadcast kids programming. So it's all going to NHK, so you really - if you're talking about broadcast, you're talking about NHK and you're talking about NHK Channel 3. So getting on television, that's the first task, and then when you want to get on television, the kids have to like it. If the kids don't like it, it just doesn't...
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| R : |
You won't to be on television for long... |
| F : |
That's to have an enduring evergreen type preschool product. There is another market where you really go into the sort of the fashion market, its more young girls, its junior high school, high school girls. I think Sponge Bob is probably, shouldn't mention competitors' products but its that sort of a phenomenon and Sponge Bob might prove to be enduring.
But I think its kicked off as Pingu did, to be honest, with junior high school, high school girls and they buy a lot of stuff but the challenge there is that they move on, and if you find you don't want a market after that and once reach out or start to smell blood and they sort of see sales falling, they quickly clear off their shelves and the next brand is in there.
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| R : |
But is television the be-all and end-all, is there any grassroots marketing, any alternative types of exposure that you can give to products if you don't have the blessing of TV? |
| F : |
There is a certain business you can build and you could create a business of up to maybe 50 million, 60 million in retail based on word-of-mouth, based on the internet, there are few brands around that have done that online and mobile. But I think to get into the really top league, to get above the 150 million, get into 200 millions and that sort of sphere, you really need broadcast television to drive it.
And a lot of that is really a B2B perception, you know to get Takara Tomy and Bandai and Gakken and these sorts of companies to invest, it's like 18 months old, but they are starting their product development - to get them to invest that sort of money in toys, they need to be sure that the brand is going to stay there and broadcast television for them is their indication.
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| R : |
Right. Is there an issue in Japan vis-à-vis the fact that these properties are foreign when Japan obviously has a lot of its homegrown properties and the idea well, you know, okay Mickey Mouse is fine, and what have you, because its part of world culture, but really we've got our own characters now, why do we need these foreign ones, how would you describe... |
| F : |
I definitely do...I think Japan is probably one of the most competitive markets for character brands, preschool and kids generally. The thing with Thomas is I don't think it's particularly seen as a foreign brand. The thing that amazes me about Thomas is that no Japanese company did it, it's a train culture and the train category was just left there for a foreign company to come out and take. It's just amazing.
I think that was the exception and not the rule, I think it was opportunistic probably of the company that was doing it at the time. They just bought - it was sort of like Rupert Murdoch buying the soccer rights in the UK and building BSkyB on the back of it, why was it that British broadcasters sat around for years and didn't give the public what they wanted.
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| F : |
It's a similar situation, it's just amazing. We came in and we captured it, and we - luckily we did it with a brand that's so unique that no one else can really come in. You know, you couldn't even come in with a shinkansen and steal the train market from us, no, because Thomas has it and its Thomas... |
| R : |
It's almost the generic example of intercultural train harmony, almost where everybody loves trains. So there is no localization of Thomas in terms of culture aspects regarding the shows and... |
| F : |
No. I think the thing about Thomas is it's its own world, its Sodor Island and its Thomas and his friends, and there are some human characters in it. But they are not really the focus, so it's sort of a culture onto itself. |
| R : |
So it's like an idealized train world which appeals cross-culturally. |
| F : |
And for a lot of Japanese kids, Thomas for them is steam train, it's become a proper noun, it is part of the vernacular I think. It's interesting though because you do need to - an important part of television especially is localization, and we are still early stages, but we are sort of playing with ideas of how to localize Thomas, and it's sort of a watch this space type thing but I think somewhere around next year... |
| R : |
Do you have any recent or upcoming developments that you're particularly excited about at the moment? |
| F : |
Yes, there is one, and now that you've mentioned it, Bob the Builder, DVD special, called 'Built To Be Wild'...
|
| F : |
It's Bob and his friends out in the west...
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| F : |
Hee-haw type adventure and they find an old mine and they have to - all those sorts of adventures, it's great fun. And what we did on that, and this is actually something I took from my television background with Fox, is that one of the challenges with content, with foreign content, let's say, Thomas is foreign content, in this context Bob is foreign content, is to make that - is to communicate the excitement, the entertainment value that your product has.
And you are competing against all these Japanese brands, which parents have known, they know more about, so what I have always tried to do is to use people who would be able to bridge that gap.
And I have used a lot of foreigners, well-known foreign talent and who are respected by parents. Thane Camus, for example, is one person who used to help us a lot at Fox, and I got in touch with Thane again and he has done, he came on as a guest voiceover talent for a new character in this particular series, and he's helped us out with a lot of interviews and publicity and whatnot. We did a TV spot with him, it's running on TV Tokyo at the moment.
|
| R : |
Selling Bob The Builder... |
| F : |
So watch out for Thane, and he's brilliant, the Japanese loved him, we did test market and focus groups and everything, and he is perfect, he is brilliant and all that. And Thane actually - his own children loved Bob The Builder, so it's from the heart, the whole thing that they actually loved him, he knows Bob The Builder far better than we do. He's seen the shows a 100 times. |
| R : |
So he's made his children very happy. |
| R : |
One last question. What is your experience with the Nikkei Weekly, is it a newspaper that you are familiar with?
|
| F : |
Yes, I subscribe to it and I actually pass on to my Japanese colleague here, what was done on it, and I put a big circle around a couple of articles, I don't want to overload him, but you know articles related to our industry... |
| R : |
Take a look at this... |
| F : |
Would be good for him to read and I think it's excellent for anyone in business at all, for Japanese people learning, business people learning English, it's a great way to pick up vocabulary to build up just reading comprehension and all that. It's the cheapest business text you'll get on a weekly basis. |
| R : |
Can't get better recommendation than that. Thank you very much. Thank you Frank Foley. |
Terry White / Chief Communications Officer
Amway Japan Limited
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