PACIFIC RIM TRADE : America : U.S. Market’s Size Lures Innovators : Customer bases can be huge here. But because of that very potential, the struggle to sell is a never-ending battle.
For Michael Mun, president of the Singapore-based computer-peripherals manufacturer Aztech Systems Pte. Ltd., expanding into the U.S. market has been a dream come true.
“No matter how you look at it, the U.S.A. is the single largest consumer market in the world,” Mun said. “And the U.S. market easily accepts new technology, new products. I think the use of computers there is more widespread than in any other country.”
A maker of items such as computer soundboards and CD-ROM drives, Aztech entered the American market in mid-1992, making about $10 million in U.S. sales out of $50 million in worldwide sales that year, Mun said. Last year, out of $92 million in global sales, nearly $50 million worth was made in the United States.
The allure of selling to America shines throughout the Pacific Rim countries, inspiring determined efforts not only from major corporations but also by the thousands of small and medium-sized entrepreneurial firms that help give this region its dynamism.
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“There is a lot of potential for us in the U.S. market,” said Stephen Leung, director of Star Industrial, a Hong Kong plastics-ware manufacturer. “Although it’s a very competitive market, it’s still a lot clearer and more accessible than most parts of the world.”
The total size of the European Union’s market exceeds that of the United States, but Europe “has different standards and living conditions and language and so on,” agreed Mitsuo Takii, director of the Americas Division in the research department of the Japan External Trade Organization. He continued:
“The United States is a very important market for Japanese companies because it is the largest common market in the world with the same language, the same way of life, the same standards.”
But while the American market may be big, important and open, that doesn’t mean it’s easy. The very openness of America means the competitive struggle to sell is a never-ending battle.
Star Industrial’s Red A brand of plastic kitchenware is firmly entrenched in Hong Kong and has a strong presence in other Asian markets. But as Leung has pushed to expand in the United States--often making products for sale under American brand names--he’s encountered plenty of frustration.
“We develop relations with customers and manufacturers in which the first year is always a year of trial and error,” Leung explained. “We figure out all the errors and iron out all the bugs in the first year, so we really don’t make any money the first year. If the product line is a success, we probably will break even by the second year and make a profit in the third year.”
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That’s when trouble begins again.
“Most likely after three years,” he said, “some U.S. customers would probably throw in the question someplace, ‘You supply this item for me for $1, but someone else can supply it for 95 cents.’ So frustrations like this always come up.”
For Aztech, a major problem was that American customers sometimes got so frustrated trying to install computer peripherals that they gave up and returned them. Much of Aztech’s equipment is sold to manufacturers, but items such as soundboards, which provide computers with voice or audio capacity, are also sold directly to the public for do-it-yourself installation.
“You must be very consumer-oriented” in the United States, Mun said. “It must be easy to install and easy to understand. In the early days, we tried to explain it in a very lengthy format, and we created a lot of confusion. Most users don’t read the manuals in much detail. If you put in a lot of computer jargon, it will be returned.”
So Aztech made a determined effort at creating simplified instructions.
“Now we have a lot of graphics, and we try to limit the instructions to one page,” he said. “We learned from our mistakes. . . . As a company from the Far East, we had a lot to learn about American culture, American philosophy and thinking, and how business is conducted.”
In another field, toys, Japanese manufacturer Takara Co. Ltd. finds American consumers rather easy to please. But there are other problems.
For instance, the high value of the yen in recent years--which drives up the cost of Japanese goods in dollar terms--has made it virtually impossible for Japanese-made toys to be sold in the competitive U.S. market, according to Tamio Watabiki, head of the firm’s international division. So Takara makes toys for the Japanese market in Japan, but toys for the U.S. market are made according to its specifications in China, Indonesia and Macao, then sold through American toy companies under their brand names.
“Japanese consumers are very much ultra-strict on the quality of toys,” Watabiki said. “They care too much about small things, while American consumers are very generous.” On cosmetic matters such as traces of excess plastic left from the molding process, toys bound for the United States don’t require the same level of quality demanded of toys in Japan. Packaging can be simpler too.
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“Japanese consumers like deluxe boxes,” the Takara executive explained. But in the United States, where 70% of all toys are sold at discount stores or supermarkets, it is perfectly acceptable to use “blister packaging,” with the toy placed on cardboard and covered with plastic wrapping. Partly as a result of such differences, toys cost half as much in the United States as in Japan, Watabiki said.
What Takara cares about most in the U.S. market is having balanced, cooperative relationships with American toy manufacturers such as Hasbro Inc., Mattel Inc. and Tyco Toys Inc., he said. “These ties enable Takara to bring U.S. toy concepts to Japan. That’s our corporate strategy. We do not want to be a competitor with U.S. toy companies. We would rather be a partner.”
As an illustration of the business, Watabiki pointed to the way toy concepts based on Teenage Mutant Ninja Turtles have bounced around the Pacific Rim.
The Ninja Turtles were conceived by two American artists who founded Mirage Studios, and popularized mainly by the U.S. operations of Hong Kong-based Playmates Toys. Watabiki arranged rights in Japan for Takara, which proceeded to develop its own versions of Ninja Turtle toys. Now Takara has sold some of its Ninja Turtle concept modifications back to Playmates for use in toys sold in the U.S. market.
Takara’s emphasis on its home market is reflected in its sales figures. Out of total global sales of $430 million for its 1993 fiscal year, $385 million was in Japan and about $20 million in the United States. But U.S. operations are still “very important,” Watabiki said, largely because of this two-way concept flow. “We are much dependent on a company like Hasbro,” he said, noting that Takara has marketed Hasbro’s “Game of Life” board game in Japan for 26 years.
“The U.S. is very rich in worldwide popular characters,” he added. “They have Ninja Turtles, they have GI Joes, they have many things.”
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The niches that exporters from different Asian countries find in the U.S. market tend to change as industrialization spreads through the Pacific Rim. In the late 1950s, South Korea’s textile industry employed one-fifth of the country’s labor force, and clothing exports to the United States provided most of its foreign exchange. By 1987, textile exports surpassed $10 billion, making South Korea the third-largest textile exporter in the world.
Since then, strict textile quotas in the United States and other overseas markets, together with the emergence of other South Korean export industries such as petrochemicals, electronics and heavy industrial goods, have led to a sharp drop-off in the importance of the textile trade. More than half the country’s textile exporters have either switched to other items or gone out of business. One of the survivors is Choi Young Ae, 40, who founded Y. A. International in 1981 after working for nine years at a large trading company.
Choi prospered by positioning her firm to deliver higher-quality products than those produced by emerging textile powers, such as China, while keeping prices below what Japanese manufacturers charge. Her determination to hang on was buttressed by a 1987 trip to survey the U.S. market, she said.
“I found there was an unlimited market there. I saw Americans change their clothes very often. They dress differently for work, for parties and for recreation.”
Choi persuaded managers at the factories that supplied her goods to upgrade their products with complex patterns and higher-quality materials. She also established stable links with U.S. importers such as M. M. Fab Inc. and Morex Enterprises.
A key to success in the United States is creativity, she said.
“Quality product is not the only thing needed,” she said. “You need to pay close attention to market trends, the fashion industry, and you must satisfy clients’ needs with good service. Most important is that in this business, you must be prepared to work really hard. Nine-to-five does not apply.”
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Times special correspondent Christine Courtney in Hong Kong and Times researcher Chi Jung Nam in Seoul contributed to this article.
