NRI Papers
No.146 September 1 , 2009
  Growing beyond Galapagosization
—A Strategy for Approaching Emerging Markets Utilizing Japanese Business Expertise—
 
Fumikazu KITAGAWA
   In the past several years, it has often been said that "Japan is just like the Galapagos Islands in that Japanese companies endeavoring to meet the demands of the Japanese market are similar to the animals living in the Galapagos Islands that followed a unique evolutionary process." Such "Galapagosization" refers to a phenomenon in which technologies and technical standards developed by Japanese companies are overly concentrated on the Japanese market, which resulted in creating standards that are only accepted in the Japanese market, causing a major hindrance to the global deployment of such standards.
   Actually, Japanese companies have not yet been able to satisfactorily expand their business activities in the emerging markets that have recently been achieving rapid growth. They are having difficulties in competing with local companies as well as other overseas companies. A questionnaire survey conducted by Nomura Research Institute (NRI) revealed that, surprisingly, Japanese companies do not yet have an adequate understanding of the actual situations of local consumers.
   Under such circumstances, consumer segments that have increasing interest in Japanese products have appeared. These segments consist of households with annual incomes slightly exceeding $10,000. Successful cases in emerging markets suggest that local consumers in these segments have a sort of yearning for Japanese products. The question that then follows is what strategy Japanese companies should adopt in approaching these rising segments of households with annual incomes of at least $10,000.
   According to our surveys of Japanese companies that are successful in emerging markets, they have not necessarily adopted a strategy of increasing sales by lowering prices. Rather, they offer the image of Japan and new lifestyles to local consumers, and set prices at an affordable level.
   Based on company surveys and consumer surveys in each country, NRI reached one conclusion. To grow beyond Galapagosization, Japanese companies should target the rising segments of households with annual incomes of $10,000 or more, and should adopt a strategy that cultivates a yearning for Japanese products by skillfully leveraging the essence of Japan.
Contents
I Further Expansion of Emerging Economies
II Characteristics of Emerging Markets
III Fundamental Points of a Strategy for Moving beyond Galapagosization

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