Time - Man of the Year/Time_Man_of_the_Year_Compact_Publishing_3YX-Disc-1_Compact_Publishing_1993.iso/moy/100592/1005310.000

Text File | 1993-04-08 | 8KB | 166 lines

                                                                                TECHNOLOGY, Page 68

Byting Japan


Apple Computer shows how to crack the world's toughest
consumer-electronics market

By EDWARD W. DESMOND/TOKYO


    Executives at Apple Computer's Japanese subsidiary are
still laughing about the time a shipping-company employee drove
up in a refrigeration truck to pick up crates filled with
Macintosh computers. He had seen the company's rainbow-hued
apple logo on the boxes and assumed they contained fresh
produce. The irony was fitting: in the first few years after the
1983 entry of Apple into Japan's $7 billion personal-computer
market, its Macintoshes, unsold, were gathering dust on the
shelves of computer shops in Japan.

    If Apple staff members in Japan can laugh today, it is
because the company has succeeded in dramatically reversing its
fortunes there during the past four years. Since 1989 Apple has
increased its market share in Japan nearly fivefold, to 5.4%,
selling 120,000 machines in 1991. That is still small compared
with giant NEC, which controls more than 50% of the
personal-computer market in the country, but Apple hopes to
reach a 7% share and sell 50% more computers this year, for $500
million. Maneuvering its way among behemoths like NEC, Fujitsu,
IBM and Toshiba is no mean achievement for Apple, especially
since overall personal-computer sales have slumped during the
past two years. Says Satjiv Chahil, marketing vice president for
Apple Pacific: "I think we have won Japan's respect."

    In the process, Apple (worldwide sales: $6.3 billion) has
joined a select group of American companies that have debunked
the myth of Japan as a fortress impenetrable to outside
products. But cracking the Japanese market has had deeper
significance for the California-based company: with profit
margins steadily shrinking in the personal-computer business,
CEO John Sculley has set out to expand Apple's business into
advanced consumer electronics like CD-ROM players and personal
digital assistants (PDAs), far more powerful versions of the
electronic pocket diaries developed by Japan's Casio and Sharp.
Sculley believes Apple has a key advantage because it pioneered
software that makes computers simple and fun to use.

    Sculley's vision enticed electronics giants Toshiba and
Sharp to form alliances with his company earlier this year.
Apple is contributing software know-how and product design to
manufacture a CD-ROM player with Toshiba and a PDA with Sharp;
the Japanese firms are providing manufacturing expertise along
with key components such as flat-screen displays. Says Sculley:
"We cannot afford to fund these projects by ourselves. These
alliances give us a chance to be players in an important growth
area." Agrees Toshiba's Takehiko Kotoh: "In the 100-m race,
Apple is the top runner. They are very quick to move, and they
are very open about what they are doing."

    No one in Japan would have spoken so flatteringly of the
U.S. firm four years ago, when Apple was doing nothing right in
that market. The company had priced its best-selling equipment
too expensively -- a Macintosh Plus at $2,842 in 1989 had a tag
more than 60% higher than the U.S. price. Apple left marketing
and distribution exclusively to a subsidiary of Canon, which saw
little point in exerting itself on behalf of a lazy American
client. Worst of all, Apple had not taught its computers to
speak Japanese. In early 1989 only six software programs were
available in Japanese, and a computer without software is about
as useful as a phonograph without records.

    But a change in attitude was beginning to take shape. In
1988 Sculley decided to take the Japanese market seriously.
Seeking to address the software problem, Apple sponsored forums
of Japanese and American software makers to encourage
cooperation. The strategy worked: today about 500
Japanese-language programs exist for Macintosh, and several
Japanese-language magazines for Apple enthusiasts are being
published by local software companies. Access in Japanese to
Apple's highly regarded software in graphics, desktop publishing
and music writing established the company as a leader among
designers, artists and small publishers, as well as among a
surprisingly large number of big companies keen to improve the
look of their internal publications. Says Takefumo Kanoya,
general manager of the Japan Personal Computer Software
Laboratory: "Apple has its own culture, the Mac culture, which
is the key to its success. It has finally come to Japan."

    In relatively short order, Apple Japan hired a Japanese
management team, appointed a local board of directors, listed
its shares on the Tokyo stock exchange and dropped its prices
to competitive levels -- all meant to demonstrate a long-term
commitment to Japan. Most important, Apple took charge of its
own marketing and advertising. An award-winning Apple television
commercial shows a bemused young businessman's face as he asks
himself, "In love with my work? What happened to me?" Apple
Computer is the answer, of course.

    The whimsical ad campaign contrasted Apple with the
dark-suited imagery preferred by the likes of NEC. Apple also
went after youthful consumers by backing a 1990 Janet Jackson
concert in Tokyo and a Japanese Ladies' Pro Golf Association
tournament last month, the first time a major corporation has
ever sponsored a Japanese women's tourney. Says Chahil: "We are
championing causes. Besides, women are becoming more important
in professional life. If women vote for Mac, maybe the next
generation will too."

    What the next generation does will depend largely on
Apple's next generation of high-powered "information
appliances," which will reach the market in 1993. Sculley is a
leading advocate for the view that the high-tech world is on the
verge of another revolution spurred by stunning advances in
miniaturization, data storage, digitization of information and
telecommunications.

    The company's premier product for the new age is the
Newton, a PDA produced in cooperation with Sharp, unveiled in
May for release early next year. The Newton fits in the palm of
the hand and employs a touch screen rather than a keyboard;
entries like appointments or notes can be handwritten on the
screen with a stylus. Newton has a slot for credit-card-size
memory and program cards, like guidebooks or maps, and can make
wireless data transmissions by fax.

    Apple's CD-ROM joint venture with Toshiba is focused
through Kaleida, a subsidiary at work creating an operating
system that will make the disks playable on a variety of
computers. The CD-ROM can hold digitized text, still images and
even video as well as audio. Its main appeal is that it can
accommodate data equivalent to that carried by 1,000 regular
computer disks or about 250,000 pages of text. At this point,
fewer than 5% of personal computers are equipped with CD-ROM
players because no standard exists: a CD-ROM for Apple, for
example, does not run on an IBM machine and vice-versa. As a
result, the industry is paralyzed; book publishers have made few
titles available on CD-ROM, and computer manufacturers have
shied away from pushing CD-ROM players.

    Sculley hopes that Kaleida will overcome the problem. In
late July, at an industry conference that Apple sponsored at
Hakone, a mountain resort near Tokyo, he announced that starting
next year his company will build CD-ROM players into most of
its computers at cost to stir consumer interest. Says Chuck
Goto, general manager of S.G. Warburg Securities in Tokyo: "The
new technology is ready, but so far, no one has shown the
imagination to figure out a product consumers want. Apple is
trying to build the critical mass." If the company succeeds, it
will be blazing an impressive trail -- similar to the one it has
cut by building a base in Japan.