Problem:
Strategic alliances and joint ventures are often preferred strategies to enter foreign markets and to avoid classic mistakes such as the cookie example (Cookie Example illustrated below!). Has your organization (or any other you are familiar with) been successful in forming alliances with companies in other countries? Why or why not? What advice would you give to your organization's leadership? In your response, be sure to define what you mean by a "successful" alliance?
How should an organization approach "cultural due diligence" when assessing a potential acquisition target? To what degree does the approach vary by country? How effective are some of the approaches that you have experienced or with which you are familiar? Explain.
Case Scenario: “The Cookie Lesson”
One specific example came to me in what I refer to as “the cookie lesson.” Years ago, I was advising a gourmet cookie manufacturer that produced exquisite cookies made with the finest ingredients known to man. There were white and dark chocolate chip cookies, oatmeal cookies made with rich oatmeal, and my favorite, cookies baked with pinon nuts.
The cookies were presented beautifully and individually wrapped. They came packed in a collector’s tin painted with a Southwestern scene. The beautiful tin, which was made to be kept for storage, reminded me of the tins my mother would save to store yarn, fasteners and other miscellaneous items. Tins like this typically would stay in a family like mine for many years.
The cookies weren’t cheap, but in my American mindset, they were worth every penny of their premium price. I thought that the fine quality of the product and its superior presentation were a good match for Japan, where such characteristics are highly valued in food products. Foreigners who have been in Japanese supermarkets are generally “wowed” by the immaculate way that foods are packaged and presented.
I immediately started researching the Japanese market and began to identify the optimal distribution channels and price points for the cookies. After doing the “nuts and bolts” homework, I then decided to seek the advice of my friend, Akihisa “Andy” Inagaki, who was then working for the Japan External Trade Organization in the U.S. He had been “lent” to the Japanese government from his Japanese company, Nissei Sangyo, which makes advanced electronics and industrial machinery for worldwide clients. Having many years of experience and a kind heart, Andy had become my Asian mentor.
I invited Andy to lunch and over coffee, I presented two tins of these cookies for his review and enjoyment. After several minutes, I began to sense that he was not thrilled about the idea of exporting these cookies to Japan. Curious to his reaction, I asked for his opinion. What ensued was a lesson for me in the way that most Americans perceive value.
Andy looked at me and said “Good quality and nice presentation. However, the cookies are too big.” Not understanding what he was saying to me as I held one of the cookies, which was nearly the size of my hand, I asked him what he meant. Andy used the example of eating sushi in Japanese restaurants where the finest sushi chefs work. Each individual piece of sushi is small, generally no larger than an average person’s thumb. However, each little piece is painstakingly cut, molded, placed on a rice block and presented with the appropriate garnish on a small sushi plate.
He explained to me that smaller products are perceived to have more value in Japan, because it is assumed that more design and engineering were dedicated to their creation. A jumbo-sized cookie was the antithesis of this cultural value.
Conversely, in the U.S., bigger is better. We equate value to additional volume and quantity. Think of going to buy a Big Gulp soda on a hot summer’s day. On approaching the soda fountain, the 48-ounce soda has the same price as the 32-ounce soda. Most Americans don’t think twice about reaching for the larger size, because we perceive it to be a better bargain. We do this in spite of the fact that many of us are incapable of finishing the larger drink. The typical reaction of most Japanese when they are handed a jumbo-sized product is one of incredulity.
The sweetness of the cookies was also an issue. Most Americans wouldn’t recognize the typical Japanese cookie as being a cookie. They tend to be smaller and drier. Many are made with a minimal amount of sweetener and taste very bland to an American with a sweet tooth. While it is true that there are now many different European-style cookies in Japan, my big, calorie-laden, rich cookies were something out of the ordinary.
Furthermore, the packaging itself was a problem. The large, round tin would be too unwieldy for Japanese food distributors who use smaller trucks and have to meticulously pack and transport their items in order to optimize deliveries. Many Japanese grocery stores still tend to be of the “mom and pop” variety. These stores are extremely small compared to the large American supermarkets. Like the food distributors, storekeepers use every millimeter of space within the store to provide a wide breadth and depth of products to their customers. The large American tins would crowd out the precious retail space of other popular products.
Finally, most Japanese homes are the size of a small two-bedroom apartment in the U.S., and the homeowner has to be extremely selective about what is kept in the house. Space is precious in Japan and smaller, compact items are valued.
Thankfully, this mistake only cost me a little embarrassment and very little money. Eventually, we were able to find other foreign targets for this manufacturer, where the nature of the product was a good match for the cultural considerations of the market. However, this experience was a microcosm of cultural awareness, which still remains with me today. Whenever I am reviewing products for export or import I think about the “cookie lesson.”