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Internationalization of service businesses centered on the Asian market

Asian Service Business Research Institute

Many years have passed since the phrase "post-industrial society" was coined. It has been said that industrialization will be followed by a shift towards a service economy which will support economic growth in the 21st century. The industrial society of the 20th century focused on manufacturing to create numerous employment opportunities. It rapidly grew the economy through the production of goods, enabling a comfortable and rich lifestyle. However, markets are now saturated with products such as automobiles, luxury household appliances, flat-screen televisions, personal computers and mobile phones. Products created through high-level R&D (research and development) as well as marketing are faced with fierce price competition, making high profits difficult to realize.

Since the 1980s, it was widely understood that Japan needed to break away from its dependence on manufacturing in order to sustainably grow its economy. to the problem was trying to find an image of reform for effecting this change. Although a shift in employment towards the service industry can already be observed, the current service industry alone is not capable of supporting national economic growth. There is an urgent need to create and implement a model for new service businesses, or a model for shifting the manufacturing industry towards service.

How can Japan break away from this stagnation? The Asian Service Business Research Institute (ASB) is attempting to answer this question by applying a new perspective, and is drawing much attention from scholars of management and economics as well as management practitioners throughout the world. ASB is searching for a new management and economic model which recognizes the trend in which Asia is becoming the world's largest center for the globalization of service business in the 21st century. The ASB started in 2010 as an Organization for University Research Initiatives at Waseda University. We discussed the institute's projects with Director Masataka Ota (Professor, Faculty of Commerce) and research associate Jusuke Ikegami (Associate Professor, Center for International Education).

Professor Masataka Ota (right), Director, and Associate Professor Jusuke Ikegami (left), research associate

The CAI triangle as the world's center

Until around the 1980s, Japan was the only nation considered advanced in Asia, while the rest of the region was still developing and slow to modernize. In the past 20 to 30 years however, rapidly growing markets have emerged in China, Korea, Taiwan and ASEAN countries, making Asia the growth center of the world. No longer just a production base for advanced Western corporations, Asia is also experiencing dramatic growth as an independent economic region.

"I believe that the triangle formed recently by China, ASEAN 10, and India, or what I call CAI, is of utmost importance. The CAI alone has a population of nearly 3 billion people; when you include countries like Japan, Korea and Taiwan, you find that nearly half of the world's 7 billion people are concentrated in this area. Asia will undoubtedly become the center of the global economy in the 21st century, and Japanese corporations have a fundamental advantage because of its geographical and cultural proximity to this market - advantages not readily enjoyed by Western and multinational corporations in the world." (Professor Ota)

Market scale from the perspective of population and an increasingly meta-national competitive environment
Source: OTA, M. (2008) Asian Emerging Markets and Asian Emerging Multinational Corporations, International Business Introduction(Chuo Keizai Publishing, p. 216, additions and editing made)

Entering and penetrating these Asian markets is crucial for Japan's economic and industrial growth, but the growth of Asian markets will be led by the service business the conventional manufacturing. This is the vision upon which the Asian Service Business Research Institute was established.

"Normally, service businesses cannot succeed without adapting to local cultures and customs through localization. It is impossible for service businesses to expand globally as easily as manufacturing businesses do, and this is both its weakness and strength. However, as the service business grows and matures, we now see businesses that succeeded in specific local markets overcoming language and culture barriers and undertaking full-scale globalization by entering markets in other countries and regions. The growth of Asian markets and internationalization of the service business are advancing concurrently. These two trends are likely to connect at a fundamental level and produce a synergistic effect. Our researchers have addressed an overall view of these major trends." (Professor Ota)

One example of a unique Japanese service is a type of home delivery service called Ta-Q-Bin. Ta-Q-Bin enables customers to specify delivery times and payment methods, and also offers special services such as refrigerated delivery. This detailed and well-attended delivery service exists only in Japan, but has finally started to enter the Asian markets. Yamato Transportation Corporation entered Shanghai and Singapore in 2010 and Hong Kong in 2011, bringing their Kuroneko Yamato Ta-Q-Bin home delivery services overseas.

"Of course, not all aspects of Yamato Transportation's expansion overseas have gone smoothly. Due to safety concerns, delivery services where the transporter visits individual customers' homes are not easily accepted in countries other than Japan. Ta-Q-Bin has expanded to every corner of Japan and been thoroughly localized to meet the needs of Japanese people. How can Ta-Q-Bin be formed into a service that is accepted in the numerous regions within Asian? This is one important topic at our institute, and we have visited Shanghai, Singapore and Hong Kong to conduct research and surveys." (Associate Professor Ikegami)

Members of the survey team for Yamato Transportation Corporation's entry into the Asian market

A gathering of management scholars and economists

Waseda University has always enjoyed a solid reputation in Asian research. Until now, a key concept in Asian research has been Japan's historical role as "gateway" for the Westernization of Asian countries through its own absorption of Western civilization and culture. Asian research in the 21st century will focus on Japan's role in assisting Western and other overseas corporations in understanding and entering Asian markets.

"Within such research, emphasis is placed on the interpretative ability of Japanese researchers. Even overseas, Japanese researchers are renowned for their ability to interpret social and historical phenomena. ASB is an advanced research institute that aims to decipher the direction of the service business, service economy and employment in 21st century Asia. Western researchers have high expectations of our institute." (Associate Professor Ikegami)

To construct new interpretative studies for Asia, teams comprised of researchers in management, economics and science/engineering were formed. Participating researchers are not only academics, but also include many who possess a practical business background, such as high-ranking global strategy and human resources specialists.

"Even in the field of management alone, we have many researchers specializing in different fields such as cross-cultural management, organizational theory, human resource management, venture capital theory and accounting. Moreover, a unique feature of our institute is participation from theoretical economists whose expertise is developmental economics and international economics. Even though management studies and economics both focus on similar themes, they sometimes adopt completely different approaches. Until now, there were few opportunities to form a partnership between these two fields. In our current research, we have taken advantage of this disparity and enlisted all of our members to conduct corporate field work. We seek to construct new interpretations by using completely different perspectives to survey and investigate the same subject." (Professor Ota)

Research system of the Asian Service Business Research Institute

Yet another feature of the ASB is the participation of top-class researchers from around the world. Researchers at the ASB include distinguished researchers such as Professor Stuart Hart of Cornell University, who leads the world in BOP (Base of the Pyramid) research for emerging markets, Professor Jitendra Singh of the Wharton School at the University of Pennsylvania, who leads research in Indian corporations, and Professor Dominique Turpin, President of the IMD Business School in Switzerland, an institution famous for its global competitive ranking.

At the institute, overseas researchers are invited to participate in research meetings and international symposiums known as "ASB Seminars." In December 2011, a symposium was held to celebrate the publishing of the Japanese translation of "The India Way" which was co-authored by Professor Jitendra Singh and Harbir Singh from Wharton School. In June 2011, Professor Stuart Hart was invited to hold a symposium titled "The Forefront of BOP Business." Following this, Professor Geert Hofstede, Emeritus Professor from Mastricht University, a global authority on cross-cultural management, was invited to hold a seminar on "Cross-Cultural Management: Surviving the Influence of Culture." In February 2012, the ASB Institute held a seminar titled "Rethinking the Growth of the Chinese Market - From the Perspective of an Alliance of Taiwanese and Japanese Corporations," a symposium focused on the growth of the Ting Hsin International Group. Together, these seminars were attended by more than 700 people from academic and industrial circles.

Professor Jitendra Singh gives a lecture on Indian corporations (February 2011)

Panel discussion regarding the entry into China by the Ting Hsin International Group (February 2012)

Japanese-style management as seen from Asia

"A characteristic of product business is that production and consumption are different processes. Conversely, in the case of service business, production and consumption occur simultaneously. Value co-creation by producers and consumers is the essence of service business." (Associate Professor Ikegami)

In product business, the ability to repeatedly and stably exercise the same function leads to what is referred to as a utility economy. The service business economy on the other hand is an experience economy in which acts take the place of goods. What is being offered are experiences like receiving valuable information, organizing one's way of thinking or relaxing. For example, consider an IT business like Google. Initially, the superiority of its technology was largely responsible for determining the company's competitiveness, but as technology matured the focus of competitive power shifted from technology to contents and services.

"The essence of service business is to create and provide services that best match individual consumers or clients. Such services are derived from the knowledge and experience accumulated by corporations and their people. In other words, the important elements of value co-creation services cannot be standardized or mechanized, like implicit understanding, context, connectivity, relationships, trust and culture. In this respect, I believe that it is quite feasible to establish a business model which uniquely suits Japanese corporations and Japanese people. By advancing research in Asian business, we will see new interpretations of Japanese-style management, which has only been discussed so far in contrast to Western-style management." (Professor Ota)

There are great expectations for the ASB Institute to release research results that will pave the way for Japanese corporations and people to successfully internationalize in Asia.

Panel discussion during the seminar to commemorate the publishing of The Indian Way.

Related Links

Asian Service Business Research Institute, Waseda University,
Organization for University Research Initiatives, Waseda University
Faculty of Commerce, Waseda University