On the contrary, the Japanese enterprise tends to accept the market price as a given parameter over which it has no control; management will only be in a position to generate profits if it can control costs effectively. The Japanese equation symbolizes a fundamentally different pricing strategy: SP – C= P.
The parameter SP, from where the strategy evolves, is determined outside the company. Whereas the Japanese develop their strategy starting from given market conditions. Western firms prefer a competitive strategy based on internal parameters.
It has been noticed in recent years that the Japanese, by "accepting" market prices in the United States and Europe, are able to operate quickly at a profitable margin, thus uncovering a certain slackness and waste originally accepted by Western industries. It is not surprising that after some time they establish a considerable market share by lowering prices of high-quality goods and reaping the full benefits of the experience-curve principle. (If the volume of production increases the cost per unit decreases; it is then possible to determine today's sales prices on the basis of next month's cost. A close monitoring of the downward trend of costs not only ensures profitability, but guarantees an expanding market share as well.)
The foreign product or service in Japan can be positioned at a high price, and successfully, if it has an image all its own. This is not the image found in the foreigner's mind; it is found in the mind of the Japanese public, distributors as well as users. For marketing purposes, it is obviously this Japanese image of foreignness that must be taken into account, be it consonant with reality or not.
A product introduced from outside their world is appreciated for its novelty. It incorporates features that Japan does not yet master or perhaps will never master. So, this extraordinary item justifies an "extra" price, until the day when enough experience, ideas and information have accumulated to generate the same or even a better product locally. Then the extraordinary (foreign) product becomes an "ordinary" product, and the price is again a given parameter of the market. Meanwhile, the Japanese are indeed willing to pay a premium for this extraordinary product, but they also realize its ambiguity: "Will the product be available on time? Is there replacement in case of defect, and when? What is the after-sales service?"
This Japanese image of foreignness must be recognized by the foreign exporter, whatever his own view of the product may be. The development of a marketing strategy with image as a key variable may help overcome the uncertainties created by such foreignness. Image has three dimensions: the product, the corporation, and the country of origin.
The product image should testify to quality and reliability. Foreign products in Japan, and in other markets versus the Japanese, may suffer on these two counts. Japan is considered to be the champion of quality, and Western mass media reinforce this image, often to the detriment of Western industries.
The second dimension of the image, the corporate one, has to complement the first. Both could offset the damaged outlook for European and U.S. products and convey to the Japanese public strength in innovation and continuity in quality and service, notwithstanding rapid technological change undermining the attractiveness of an existing product. Unfortunately, foreign corporations operating or wishing to operate in Japan are in a weak position for two main reasons.
First, the number of foreign firms with investment and/ or representative offices in Japan is very limited. Out of the more than one million enterprises in Japan, fewer than 2% are foreign affiliated. Many marketing managers are at a disadvantage, simply because they lack a corporate presence in the market itself.
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