by Akio Morita
A couple of years ago, when we were being bashed very hard on trade, I told the prime minister, “If you are so close to President Reagan that you are on a first-name basis, please say more to ‘Ron’ about where the problems lie, that America is very much to blame for her problems, not just Japan,” and he said something about not wanting to act the villain. I said, “I act the villain very hard whenever I go to America. I try to say things that will get people’s attention and get them thinking clearly about our problems.”
Konosuke Matsushita, the founder of Matsushita Electric, and I wrote a book in 1976 called Yuron, or roughly, “Voicing Our Concern,” a book about the need for excellence. When we were about to have it published he called me and asked me whether I thought that his criticisms in the book might somehow be bad for the nation’s business. I said, “No, sir, if we keep our mouths shut in the interest of good business, Japan may crumble to pieces and nobody will be able to say why.” Actually, criticism can hurt business, but seeing things from many viewpoints is important for businesses, for individuals, and for nations, too. Japan was ruined in World War II because she saw only her own point of view.
For a decade or longer, whenever the Americans and Europeans have told us our market is not fully open to imported goods, our government responded by saying, “We will work on it.” And then tariffs would be relaxed, some nontariff barriers would be dismantled, edging the Japanese market open a bit more. When the next complaint came, we devised plan two, taking more of the same steps. And finally after plan eight it still is not enough. All of these plans will not solve the trade imbalance. Japan’s market is opening too slowly—I have said that often. However, the main ingredient in the trade imbalance has been the problem of exchange rates. And this situation did not begin to show any improvement until the G-5 meeting, and then the pendulum of rates swung too far and raised the yen to record, and unrealistic, highs.
My point is that we Japanese should have been more adamant about exchange rates and more candid in identifying the reasons for the trade imbalance, instead of just ducking our heads and painstakingly eking out market-opening measures, which everybody knows will not solve the trade imbalance. Japan’s attitude when it comes to international negotiations is very poor. We never seem to be holding our heads up high and saying sincerely just what we think.
In 1979, together with our former foreign minister and ambassador to the U.S., the late Nobuhiko Ushiba, we held the first U.S.-Japan Economic Relations Group meeting. There were eight private citizens on the panel, and the American side was headed by Robert Ingersoll, former ambassador to Japan. At that time, American congressmen were talking about trade reciprocity. Some people were demanding that anything that is allowed in the United States in business should be allowed in Japan, and vice versa, and they called that reciprocity. The concept we of the so-called “Wisemen’s Group” came up with was not reciprocity, but equal national treatment. Our view prevailed. What we said was that when in Japan, all foreigners can engage in all the activities open to the Japanese; in the U.S. the Japanese can do what the Americans are allowed to do.
But most of the Americans I know seem to believe that since the U.S. has the least restrictions, America should set the standard for everyone to follow. We said in our group meetings, however, that to allow people from other countries to have privileges in Japan that even the Japanese themselves cannot enjoy is impossible. Reciprocity would mean changing laws to accept foreign systems that may not suit our culture. In our report we said, among other things, that “Japanese negotiators should speak up more, countering American criticism as squarely as possible, to minimize misunderstandings or misperceptions of their position. When the United States Government criticizes Japanese policy or makes specific requests, the Japanese government should respond with rational explanations of its positions and counterarguments instead of saying nothing, appearing to acquiesce, or simply saying ‘no.’ ”
I believe the future of our world trading system depends upon increasing, not stemming, trade. Right now Japan is digging her own grave in this regard. If the trade imbalance does not change, then the reaction from abroad will be to demand greater and greater restrictions on Japanese exports. We have to get to the root causes of these problems and not just react to what appears to be the problem on the surface. American industrial competitiveness must return. We are soon approaching the point, because of the loss of American manufacturing, where the U.S. may need Japan and her exports as much or more than Japan needs the U.S. market.
Some American analysts have said that Japan will slow down, that Japan is losing the work ethic, and so on. Many Japanese, too, especially a lot of the old-timers, think that we have lost our sense of loyalty or that people now work only so that they can play. People’s states of mind change through the course of time, but despite some natural generational changes in attitude, Japan’s work ethic is very firmly in place.
Japan’s position has grown stronger and more important in the world, so we can no longer live quietly in a corner with only our own needs in mind. If we are going to say something, we have to say it in a way that the other side will understand. We are not used to this, even though today we are the world’s second largest economy. But if we are going to get along with our neighbors, it is necessary for us to do things differently. We have problems with the Americans, and they are hard to deal with because Americans get so emotional. But in my experience with America and Americans, I have found that if you are straightforward and convincing they will listen and they might even change their minds.
II
We have struggled hard to expand our business and to do business in other countries by the rules of those countries. Learning how to do it was not easy, and frankly, until recently I have not seen many American companies or European companies making similar efforts.
Moving into the European market was not easy for us. We sent young men with creative minds and didn’t give them too many rules or instructions and no unusual benefits or special compensation packages. They performed wonderfully, proving again my contention that people do not work only for money. American companies that are moving offshore to cheaper labor zones will soon find that it is self-defeating. To move abroad to expand world trade is a noble thing. But if it means the hollowing out of the industry of your own nation, I think there is something very wrong with it.
Many foreigners complain how difficult it is to do business in Japan, but as I have said already, when I went to America for the first time I felt that it would be impossible to do well in that enormous market. In Japan we have a large percentage of the population in one relatively short band along the Pacific coast. They are almost 100-percent literate; they all speak the same language, have the same cultural background, see the same nationwide TV, read the same national newspapers. Consider how different the United States is, or England, or France. Yet these people often say they find Japan perplexing. It amazes me. We faced the challenges abroad, and I still wonder why so many companies are afraid of Japan and its one hundred and twenty million consumers. Expanding world trade will require companies to know and understand other peoples; that should be the first priority today, not protectionism. A company can sell its products abroad if those products are good and suit the market and if the company is willing to put some long-term effort into it. I have had experience in this, obviously. We faced a lot of obstacles and struggled to find the answers; it should be a lot easier today. I’d like to recount some examples.
Selling our products in Germany was a big challenge for me in the sixties. Of course, German companies were electronics pioneers, and they naturally considered that their consumer electronics were unbeatable. People all over the world held the names in awe: Grundig, Nordmende, Telefunken, to name the top ones. We had on our staff a young man named Yasumasa Mizushima, who had spent about two and a half years in New York with a Japanese trading company before joining Sony. He spoke English and a little Spanish. I had previously assigned him to Sony Overs
eas, in Zug, where he was busy learning French, when the idea of opening a representative office in Germany struck me. Our products were not selling well there, and our distributors didn’t seem too enthusiastic about them. We found a new distributor, and I thought if we had an office there to work with the distributor we could do better in that tough market. I called Mizushima back to Tokyo and told him he had four weeks to learn German and start work on the Germany office plan. We often joke about it now; he bought a book on how to speak German in four weeks, but after three weeks we needed him to go, so I told him to learn the fourth week’s lesson on the plane on the way to Germany.
Mizushima set up his office in Kiel, because that was where our new distributor was. He took a desk in the distributor’s office, because that was the most convenient and cheapest way to start out, but within six months we decided to move the office to Hamburg because Mizushima was covering the Netherlands and Austria as well as Germany, and transportation from Kiel was difficult. It took three hours then to drive from Kiel to the Hamburg airport.
The German consumers didn’t accept any Japanese products easily, and our distributors were not producing satisfactory results. Mizushima, who by now had learned a surprising amount of German by studying at night school, paying his tuition out of his own pocket, recommended we open our own company. I knew what kind of effort he had put into the work so far, and I had confidence in him. He used to take the German office correspondence home with him at night, translate it with the help of a dictionary, and bring it in to have his secretary check it each morning, in addition to his schoolwork and his company work. When he suggested we establish the Sony Deutschland sales company, I put him in charge of designing the project and selling it to the home office, which he did.
In the first group of seventeen people hired for the new company, only one knew what kind of a company Sony was when he applied for the job, and that man was a service technician who had worked on some of our products. Our approach to the market was to promote an image of quality. We began by selling high-quality amplifiers and receivers and tape recorders and a brand new product—a digital clock radio—in only the best electronics shops. When Mizushima first went to Germany no Sony product sold more than one thousand units a month, but within a few months sales of the clock radios alone were more than three thousand. As the Sony name began to become known, department stores and mass sales companies began to ask for Sony products, but we turned them down. Mizushima was under pressure from Tokyo to accept more and more orders, but he stuck to his guns and continued to promote the Sony image of expensive high quality. I visited every three months or so, but refrained from giving Mizushima unasked-for advice. He was only about thirty years old and was running a sixty-million-dollar business. He allowed himself to buy a company Mercedes at the end of the first year.
Our German employees increased in number to over one thousand and caught the spirit of our enterprise. They worked hard, for long hours. We gave them promotions and responsibility. Many of our employees were given authority and responsibility they could never have gotten in a German company at their young age and with their level of education. Ironically, we took advantage of a handicap in the beginning, which was that we were unknown and we could not recruit university graduates, who would find this little foreign company lacking in prestige. And so we had marvelous, energetic young people holding important jobs in this new company who appreciated the opportunity to succeed even though they did not come equipped with a degree from a famous university. We applied my philosophy of disregarding school background, and it worked in Germany as well as in Japan. Mizushima would spend long hours, as in Japan, dining and drinking with his colleagues and building up a sense of sharing. (The Sony Deutschland operation is very successful to this day and is now managed by Jack Schmuckli, a Sony executive who has amply demonstrated that a non-Japanese can run a major Japanese subsidiary;)
We had to adapt our operations and our products to the European market in order to be successful there. In many countries, such as in Scandinavia and in Belgium and France, we at first appointed manufacturers, technically competitors, to be our agents, because they had good sales capability and good names. Most of them were small family companies, such as Gylling Company in Sweden, a fine company that was very good in office communications and tape recorders, black and white television, and printed circuit boards. In Denmark we worked with Eltra, also a small maker of tape recorders, and in Finland with Helvar, another fine, small company. We had complementary products to fill out the sales lines of these and other companies we joined. Eventually, some of these companies we worked with changed into trading companies, because they could not compete with the European manufacturing giants, but they stayed in our “family.” Eltra is now Sony Denmark.
In Holland, Anton Brandsteder very boldly and effectively promoted Sony products in the Dutch market, right under the nose of the giant Philips company, from our earliest days. In Canada we had the trust and faith and good business judgment of Albert D. Cohen, Sony’s first overseas distributor, who began selling Sony products in the fifties, beginning with our very first transistor radio.
To supply the right products we had to know the markets. I sent another young man named Noboyuki Idei to Europe as our marketing manager, who found that resistance to Japanese products was high, partially because our products looked and sounded different from the European models. Also, European TV has different standards, and in the early sixties, before the PAL system was made a standard, there were four different standards, so we had to design a set that would accept any of four standards at the push of a button. The sound had to be modified, because, for example, the German language has many guttural sounds, and so we had to come up with a kind of European sound for our radio and TV speakers.
In the beginning, too, there was a great deal of resistance to our spare, modern styling of straight lines and square corners; European products were more rounded and used a lot of wood. We had some meetings on this subject and considered making different designs for Europe, but I finally decided that if we were to try to emulate European styling we would look like imitators, so it would be better to retain our own style. Our products became popular because they were distinctive, and soon the clean lines of Japanese design influenced European styling.
I wrote earlier that we had much trouble creating our own sales company in France. Idei used to joke while the two-year struggle was going on that he didn’t know it was so hard to get a French divorce. Even after we had separated from our French partner and we had opened our showroom on the Champs Elysees, our former partner complained to the French government that we were showing products not sold in France, which was then against the law.
It is curious, but the French government tries to control all investment in the country, no matter how small. The government is always trying to protect the nation from foreign industry, yet the French people are very eager to get foreign goods. It is much easier to sell to the French people than the Germans. We have persevered, despite the customs roadblock at Poitiers, and we opened a tape manufacturing plant in Bayonne in 1981, another at Dax Pontonx in 1984, and had a compact disc plant in Alsace under construction in 1986. We had a lot of help in France from Jacques Dontot, who was the honorary chairman of the Electronics Industry Association of France and became the first president and director general of Sony France. Giscard d’Estaing helped to open doors for us when we began our negotiations to open a manufacturing operation in France, and our relations since those early difficult days have been fine.
Getting our own operation going in the U.K. was not very simple either. We had as our distributors the Debenham Group, Ltd, a fine old firm, but one that could not service a company like ours with our big hopes for the future. When I sent Masa Namiki to London, he discovered that the Debenham company’s wholesale division could only assign three agents to Sony and they had to cover about six hundred dealers. Namiki went through the phone book and got a list of about two hundred and
fifty leading dealers and visited them all. He found that Japanese radios and tape recorders were considered cheap and unreliable. Unfortunately for us at the time, we were making a small number of transistor radios in Shannon, Ireland, but were not getting good quality. The local content laws required 30-percent local parts, and we could not get quality parts.
We shut down the Shannon factory and started our U.K. sales company in London in 1968, after Namiki and I had worked on it for two years. Unlike our experience in dropping our French agent, the termination with Debenham was gentlemanly; they offered us all sorts of help, and when we took five people from their staff into our new company, they did not ask for a termination fee or goodwill money. We started in the U.K. with Namiki and seven other people in a tiny office in Wigmore Hall and later set up regional sales offices in Kent, Birmingham, Bristol, Manchester, and eventually in Glasgow, Scotland. By 1970 we had a distribution center in Slough near Heathrow Airport and a service center there. Then we moved from Wig-more Hall to Hounslow, a small town also near Heathrow.
Learning to work with the English was quite a problem at first. Namiki assigned one of his salesmen to be district manager in Kent, but the salesman refused the appointment graciously because he couldn’t bear to leave his rose garden in Surrey. Namiki didn’t understand it at first; to turn down such an offer would be unheard-of in a Japanese company. Later he was invited to visit the salesman’s beautiful garden, and after a tour of the rose beds, Namiki said, “Now I understand.”
It was in an era before trade frictions had begun when Namiki suggested we open a manufacturing plant in Britain. We could see our U.K. business growing, and in 1971 we projected that we might get our share of the market up to 7 or 8 percent. Together with the other Japanese importers we could conceivably reach 10 percent or more by 1975 or 1976, and that could mean trouble from domestic makers and politicians. We gave Namiki the green light to investigate possible plant sites and make a proposal for a British manufacturing operation. He examined a lot of the country— Scotland, the northern border country, the Newcastle area, East Anglia, and Wales—and talked with many local officials about the sites, about taxes and the kinds of inducements they were offering for plant locations, such as tax holidays, leaseback arrangements, even wage supplements.
