`CHALLENGE OF CHANGE' VISITS JAPAN

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TOKYO-Recent changes and upheavals in Japanese business and society pose unprecedented challenges for advertising agencies. This is John Fitzgerald's impression after his first year as president-CEO of McCann-Erickson, a U.S. shop operating in Japan for more than three decades.

His short time in Japan feels like "10 years in one." Major events are dramatically altering the way of life, leaving many Japanese feeling threatened and confused, he said.

The high yen is chipping away the country's economic base, ever-multiplying brands are confusing the marketplace and cautious consumers are still reeling from the January Kobe earthquake, the March nerve-gas attack on a Tokyo subway and May's hijacking of an airplane in Hakodate.

"The earthquake reaffirmed the general feeling of uncertainty [about the future] and their lack of control of their lives," he said.

In an interview with Advertis, the 48-year-old Mr. Fitzgerald was philosophical about the events in Japan during his first year, referring to the unprecedented developments as the "challenge of change."

In this climate, both agencies and their clients need new approaches and ideas, he said.

McCann conducted research and concluded that these events reminded Japanese consumers that "there is a reason to be cautious and hesitant," Mr. Fitzgerald said. "This could have a drag effect on certain aspects of business."

Mr. Fitzgerald said Japan is experiencing changes in distribution channels, growing pressure from discount stores, increasing strength of retailers and "the threat of imported products." He said this adds up to "increasing pressure on profit margins for manufacturers."

One rapidly growing distribution channel is catalog shopping, which gives Japanese consumers a convenient way to choose from a wide range of international products. Time is a significant factor as the Japanese strive to improve their quality of life.

Since the bursting of Japan's economic bubble in the late 1980s, Mr. Fitzgerald said, "We see many Western practices emerging in Japan."

Retailers such as Daiei and Itoyokado are very much aware of the Western retailer trends relating to private brands and low-cost imports. They are fighting to protect their margins at the potential expense of manufacturers.

He stressed that "Japan's entire economic base is threatened by the rising value of the yen" and this is influencing both "Japanese business as well as consumers' decisions."

In marketing and communications there is an increasing need for "non-traditional thinking," he said. "Old proven ways of approaching business problems may not be nearly as effective in the highly competitive environment clients are finding themselves in."

Japanese consumers, he said, are becoming "increasingly sophisticated" and are showing a greater appreciation of "price-value" than at any time before in the history of Japanese marketing.

They simply are "far less apt today to pay excessive premiums simply for the name value" of the product. The Japanese have to choose from more brands, duplication of products and outlets than ever before.

"In Japan, where people are more cautious, this leads to an element of confusion in the marketplace," he said.

How do the changes in the business environment affect advertising agencies? Both U.S. and Japanese clients want agencies to be "smarter, faster and cheaper ..... clients look to agencies to provide insights and ideas that will help drive their businesses." He finds "Japanese clients today are more willing to examine new approaches and concepts."

In TV advertising, Japan, "has been successful with the very soft sell and indirect communication." But with the wide variety of consumer choices and their awareness of price-value, there is now a need for "a careful balance of imagery, softness and subtleness with hard information and clear end-benefits."

He said he believes the U.S. and Japanese markets are becoming increasingly similar. But he cautions that even in changing, Japan won't become a carbon copy of the U.S. or Europe. "Japan will remain very much Japan and will not change to the degree of Europe or the United States."

In Mr. Fitzgerald's opinion, media reports about the stereotypical "sameness" of the Japanese are misleading. He finds the Japanese very much individuals. He said he thought he would find the "speed of business slower and more predictable" in Japan. But he discovered the speed of business in the "day-to-day work experience was similar to New York."

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