In the late 90's, Vodafone, one of the world's leading telecom giants, set its sights firmly on the Japanese market. This wasn't just any market; Japan was known for its tech-savvy consumers and cutting-edge mobile technologies. In 1999, Vodafone's ambitions materialised when it acquired a significant stake in J-Phone, a popular mobile operator. By 2001, Vodafone had upped its stake, effectively transitioning J-Phone into its Japanese arm. The goal seemed straightforward: Transpose Vodafone's international success onto Japanese soil. But reality would prove far more intricate.
一：Setting the Stage: The Grand Entry
J-Phone was originally established in 1984 under the name "Daini-Denden Inc." or DDI (the DDI part of KDDI Corporation). DDI began its operations in the cellular market, competing with NTT's mobile arm (DoCoMo) and several other players. By the mid-1990s, they started using a joint brand for mobile services. This partnership aimed to strengthen its position against NTT DOCOMO, which dominated the market. In 1999, as a part of a broader rebranding and restructuring strategy, the mobile services offered by DDI, IDO, and several other regional cellular providers were unified under a single brand: J-Phone. The early 2000s saw significant interest from international telecom companies in the lucrative Japanese market. British telecom giant Vodafone acquired a stake in J-Phone, and by 2001, it increased its ownership, leading to a more substantial influence on the company's operations and branding. In 2003, J-Phone was rebranded as "Vodafone Japan," aligning it with Vodafone's global brand.
二：The Initial Strategy: A Double-Edged Sword for Brands in Japan
Vodafone, having achieved remarkable success in various international markets, confidently set out to integrate J-Phone into its expansive global ecosystem. The premise was simple: replicate a model that had succeeded elsewhere, capitalising on economies of scale, unified brand messaging, and product uniformity. This strategy had borne significant fruit in countries across Europe, Africa, and the Americas, often providing Vodafone with a competitive edge. However, the Japanese technological landscape was a world apart. Distinctive consumer behaviour and rapid technological advancement shaped Japan's mobile market. One of Vodafone's initial challenges was its relatively low brand recognition in Japan, especially when juxtaposed against entrenched local competitors. While Vodafone enjoyed brand loyalty in many parts of the world, in Japan, they were still perceived as newcomers. Brands like NTT DoCoMo and KDDI were household names, having built their reputation over decades and understanding the nuances of the "J-consumer" psyche.
Another pivotal oversight on Vodafone was underestimating the importance of localised content and services. Japanese consumers had a penchant for mobile content and services tailored to their cultural and lifestyle preferences. While the rest of the world was gradually warming up to mobile entertainment and services, Japan was already engrossed. Services, ranging from mobile manga readers to location-based social features, were more than just novelties; they were integral to the mobile experience of many Japanese users. However, arguably, the most significant technical misstep Vodafone encountered revolved around adopting the UMTS protocol for 3G connectivity. While UMTS was a popular standard in many parts of the world, Japan had thrown its weight behind a different measure: W-CDMA, developed primarily by market leader NTT DoCoMo. This seemingly minor divergence in technological pathways had profound implications. It wasn't just about handsets being incompatible; it symbolised Vodafone's broader misalignment with the trajectory of the Japanese tech landscape.
Despite the accumulating challenges, Vodafone pressed on, propelled by an unwavering belief in its global strategy. Their conviction stemmed from a simple notion: the universal appeal of their products, validated in numerous territories, would inevitably resonate with Japanese consumers. In their pursuit to emphasise this global identity, they anticipated the Vodafone brand would serve as a beacon of modernity and technological prowess, helping them carve out a significant market share.
However, as time has revealed, while confidence and ambition are essential ingredients for success in foreign markets, a nuanced understanding of local dynamics is equally, if not more, critical. Japan's unique tech landscape demanded a blend of global expertise and local adaptability, a balance Vodafone struggled to achieve in its initial strategy.
三：Major Missteps and Miscalculations
In the early 2000s, Japan stood at the forefront of mobile technology, aggressively adopting and implementing 3G networks to offer users unprecedented mobile experiences. By 2002, over 40 million Japanese users had 3G-enabled handsets, marking an impressive shift from 2G technology. In this tech-savvy environment, Vodafone's reluctance to shift gears and make robust investments in 3G was a glaring oversight. Instead, they continued to have a significant foothold in the progressively obsolete 2G technology, rendering them technologically backwards compared to their local counterparts. Local telecom giants like NTT DoCoMo had been pioneers in 3G deployment. For instance, by the end of 2003, NTT DoCoMo had already accumulated over 10 million subscribers for its FOMA service (the world's first commercial 3G mobile data service). Similarly, KDDI, with its "au" brand, was just a little behind, introducing advanced features and services tailored to the Japanese demographic.
The discerning Japanese mobile user of the early 2000s was accustomed to a barrage of innovations. The prevalence of mobile TV meant users could tune into their favourite shows on the go. Emoji keyboards ("Emoji" from the Japanese compound of "e" 絵, 'picture' + "moji" 文字, 'character'), a seemingly simple addition, revolutionised how the Japanese communicated, adding layers of emotion and nuance to textual conversations. Furthermore, Japan was a forerunner in introducing mobile payments, with early systems like DoCoMo's "Osaifu-Keitai" and "FeliCa" (which set the stage for cashless payments, now a massive global trend). Against this backdrop, Vodafone's introduction of global handset models, such as the Vodafone 702MO by Motorola, seemed promising. The phones were top-rated in Europe, looked sleek, and had a modern design. However, these new offerings lacked fundamental features unique to the Japanese mobile market, such as mobile TV access, video calls, advanced emoji keyboards, and the nascent mobile payment options, which had already become a staple for many Japanese users, and this was a significant misjudgment with Vodafone's strategy in Japan.
Vodafone Japan also made strategic decisions misaligned with the local market dynamics. The company decided to embark on emphasising global roaming capabilities when, in reality, only about 0.06% of Japanese mobile users utilised international roaming (market leader DoCoMo had only 30,000 roaming customers out of approx. 50m total). Nevertheless, TV campaigns were launched to promote the benefits a Vodafone overseas roaming contract could provide, featuring the super-famous Japanese model, actress and singer Yu Yamada. Unfortunately, this focus neglected the broader market. It concentrated on a minor segment, which, as anyone who has read Byron Sharp's "How Brands Grow" will know, goes against essential principles such as reaching a broad audience, avoiding over-segmentation and reaching a wide customer base.
Similarly, Vodafone targeted Japan's prepaid market, representing just 2.7% of the entire market. Despite the importance of prepaid services in Europe (by comparison, around 50% of all Italian subscribers were prepaid users at that time), Japan was moving in a different direction, with post-paid contracts the de facto norm for Japanese mobile phone users. In addition, at the time, identity verification was not required for purchases of prepaid phones, which made them the perfect tool for organised criminal gangs to aid in the smuggling of drugs, sales of stimulants, remittance fraud, auction fraud, and kidnapping. All of this meant that prepaid phones soon became linked with crime and criminality in the public consciousness, which eventually led to stricter regulations and then a complete ban on the sale of unregistered prepaid phones for residents of Japan, making post-paid contracts a much simpler and cleaner choice for Japanese consumers. Unfortunately for them, Vodafone had heavily invested in promoting and developing these services, only to face legislative challenges and negative public perception. This unfortunate association criminality resulted in the commercial failure of their national prepaid TV campaigns aimed at boosting pre-paid phone sales, based around the slogans 「使いすぎても大丈夫」"It's okay to use (your phone) a lot" and 「簡単に携帯電話を入手できる」"Easy to get your hands on a mobile phone", led to an overall decrease in average revenue per user, which proved fatal.
Another strategic miscalculation was Vodafone's decision to retire the established J-Phone brand, which resonated with the local populace in favour of a unified global Vodafone identity. This change was heavily publicised in Japan in 2003 with a massive local rebranding TV campaign featuring David Beckham, then of Manchester United fame, and Japanese actress Tomoka Kurokawa. To the global marketing team, it must've appeared at the time to have been a slam dunk! But as we know, hindsight is 20/20, and while global brand unification has its merits, in this context, it appeared tone-deaf. J-Phone was a brand that understood the local market's intricacies and had cultivated trust over the years. In sidelining it, Vodafone mothballed an established local brand identity and, at the same time, gave the public a negative perception of a foreign company, which appeared to be sidelining local preferences for a global agenda.
四：Facing the Market's Verdict: A Wake-Up Call
By the mid-2000s, Vodafone's challenges in Japan were becoming painfully evident. Instead of beating its forecasted growth and market dominance, its subscriber numbers plateaued. For perspective, NTT DoCoMo had surpassed 50 million subscribers, and KDDI had solidified its position with over 25 million by 2005. While Vodafone had once harboured hopes of commanding a significant market share, they were now relegated to a distant third, and the gap was only widening daily. One of the most glaring issues was Vodafone's network infrastructure. User testimonials and market surveys consistently pointed to Vodafone's subpar network performance. Many Japanese users reported frustrating experiences with the Vodafone network - dropped calls in urban areas, spotty coverage in rural regions, and inconsistent mobile internet speeds that couldn't compete with the blazing-fast connections offered by competitors. This was more than merely anecdotal. Reports indicated a considerable spike in network complaints compared to other local carriers during this period.
The consequences of these technical shortcomings were immediate and severe. Japanese consumers, known for their discernment and appetite for quality, began migrating en masse to other carriers. For Vodafone, each lost subscriber not only meant reduced revenue but also diminished trust in their brand.
Financially, the situation was dire. Despite hefty investments in the Japanese market, Vodafone's balance sheets told a grim story. Their profit margins were thinning rapidly, and the ROI (Return on Investment) was far from initial projections. In stark contrast, local competitors NTT DoCoMo and KDDI were posting impressive financial figures, backed by a growing subscriber base and innovative service offerings.
In essence, Vodafone's Japanese journey became a textbook example of the pitfalls of underestimating local market dynamics, technological demands, and consumer preferences. It underscored the quintessential challenge many corporations face: balancing global brand uniformity and local adaptability.
五：Vodafone Japan's Swan Song and SoftBank's Meteoric Rise
The transition of Vodafone's Japanese operations to SoftBank in March 2006 marked a significant pivot in the Japanese telecom sector. Vodafone's exit, consummated through an, at the time, eye-popping $15 billion deal, illuminated the intricate challenges that global behemoths can face in specific local terrains. Conversely, it revealed SoftBank's bold determination to cement its foothold in Japan and expand its global reach.
Masayoshi Son, SoftBank's visionary chairman, renowned for his strategic acumen and propensity for taking calculated risks, quickly embarked on revitalising the mobile user experience in Japan. Armed with a deep-rooted understanding of Japanese tastes and needs, the brand endeavoured to bridge the chasm between Vodafone's offerings and the desires of Japanese consumers. To rectify technological missteps of the past, the company soon introduced devices like the SoftBank 912T, targeting many of the deficiencies in prior models and also embarked on releasing a barrage of fresh and often left-field TV campaigns, such as the one shot by director Wes Anderson with Brad Pitt in a Jacques Tati homage; and the now infamous long-running, surreal "Otosan" TV campaigns, where a white Shiba Inu plays ‘Otosan’, literally translated as ‘Dad’ or ‘Father’. Otosan is, for some reason, the patriarch of the otherwise human Shirato family, who takes part in surreal sketches where the fact that their dad is a dog is barely discussed.
Yet, the crowning achievement in the nascent business emerged in July 2008 with the historic SoftBank-Apple collaboration. Before the deal, SoftBank was considered the underdog compared to the larger carriers. The iPhone deal not only gave the company a boost in the market but also aligned with its strategy of aggressive, disruptive moves in the telecom industry. Through his direct relationship building with Steve Jobs and Apple years before the iPhone launch and what is rumoured to have been a promise to purchase a large volume of iPhones regardless of whether they sold in Japan, Masayoshi Son managed to beat out all other competitors. When it landed in Japan, he clinched exclusive rights for the iPhone for two and a half years, with KDDI (au) starting sales in late 2011 and NTT DoCoMo in mid-2013. At the time, the move was viewed sceptically by many in Japan, given the unique mobile ecosystem, which was still dominated by feature-rich "Garakei" phone models from Japanese manufacturers like Fujitsu, Sharp, Hitachi, NEC Corporation, Toshiba and Sony. Still, this introduction was symbolic. It represented SoftBank's astute strategy of integrating globally recognised technological innovations while catering to the distinct local market. (The rest, of course, is history, with the iPhone currently capturing around 50% of the mobile phone market in Japan).
This "Glocal" approach proved phenomenally successful. As the 2010s ended, SoftBank Group Corp. boasted an impressive net income of $12.7 billion in 2019. By comparison, Vodafone globally charted a net loss of roughly -$9.3 billion in the same year. This stark disparity not only showcased SoftBank's explosive growth but also highlighted the hurdles Vodafone faced at the time in adapting to rapidly evolving global telecom markets.
But SoftBank's aspirations transcended the telecom sphere. Guided by Masayoshi Son's expansive vision, the group diversified across various sectors. From making inroads into e-commerce and broadband to shaking up the tech services landscape, the company's reach expanded considerably. Their leap into the world of robotics, exemplified by the launch of Pepper, showcased their ambition to lead technological innovation. Additionally, the SoftBank Vision Fund emerged as a juggernaut in the global investment arena. Placing bets on promising startups, such as Chinese EC mega-site Alibaba Group, the ride-hailing platform Uber, semiconductor leader ARM and many notable others, SoftBank actively propelled these entities toward growth and innovation.
At the heart of SoftBank's early success lay astute marketing strategies. By harnessing cultural narratives, its ad campaigns masterfully blended international trends with familiar local stories. This approach deeply resonated with the Japanese populace, bolstering the company's image as a brand that understood its roots and modern aspirations. It became a highly salient, well-known household brand in Japan within a few years of joining the mobile network market.
All in all, SoftBank's transformation from a small software company and ISP provider to inheriting Vodafone's challenged Japanese wing and its final emergence as a global titan underscores the value of local insights, visionary planning, and audacious execution.
Vodafone's venture into the Japanese market is a cautionary tale for multinational corporations. While they embarked with high hopes and a proven track record in various international markets, their approach in Japan was fraught with missteps, underestimations, and misaligned strategies. Their story underscores the challenges of international expansion, emphasising the importance of understanding local market dynamics, technological preferences, and consumer behaviour. Relying solely on a successful global model without local adaptation can lead to significant pitfalls. In contrast, SoftBank's meteoric rise, post the Vodafone Japan acquisition, underlines the power of astute strategy backed by deep local insights. Their collaboration with global giants like Apple, while still catering to the unique needs of the Japanese market, illuminates the perfect blend of global expertise and local adaptability. As corporations look to expand beyond their home turfs, the journey of Vodafone and SoftBank in Japan offers invaluable lessons: the necessity of striking a balance between global branding and local understanding and the unyielding truth that one size does not fit all.
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