The Changing Japanese Housing Market: US Export Strategies
for
Prefabricated Housing and Wooden Building Materials
Fact Sheet #25
The Japanese market for prefabricated homes and wooden building
materials has tremendous potential for US firms, particularly those located
in the Pacific Northwest. For example, exports of prefabricated housing
to Japan increased by 51 percent from 1994 to 1995, with 81 percent of
these exports originating from the Pacific Northwest. Despite this success,
Japan is a relatively new market to most US firms and more information
is required before US firms can fully take advantage of the opportunities
that exist.
The results of this study were derived from a census of prefabricated
housing manufacturers, export consolidators, and Japanese trading companies
located in the Pacific Northwest who export to Japan. The sample frame
included sixty-six firms: fifty-one in Washington and fifteen in Oregon.
Sixteen companies manufactured prefabricated housing, thirty-four were
export consolidators, and sixteen were subsidiaries of Japanese trading
companies.
Results
Prefabricated housing exporters in Washington and Oregon are predominately
small to medium-sized firms with less than 25 employees and annual sales
of less than $10 million. Most of these firms have been exporting to Japan
for less than five years. Despite the small size of these firms, they appear
to be highly involved in the Japanese market. Approximately half of the
respondents generated more than half of their annual sales revenue from
exports to Japan.
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The promotional strategies used by the survey respondents were fairly
limited, a fact which might be attributed to the small firm size of the
respondents and their limited financial resources. A majority of the respondents
indicated that they relied on product brochures, word-of-mouth referrals,
and trade shows to promote their products. Promotional strategies that
required a higher commitment of financial resources, such as establishing
a model home or a product showroom in Japan, were used less frequently.
The distribution channels for imported wood products in Japan are complex,
consisting of several layers of intermediaries. However, the results of
this research indicate that many prefabricated housing manufacturers and
export consolidators have bypassed the traditional Japanese distribution
channels. Approximately half of the respondents indicated that their primary
channel of distribution involves selling their products directly to Japanese
home builders. This strategy provides these firms with substantial cost
savings, while increasing their competitiveness in the Japanese market.
Most respondents noted that building strong personal relationships with
their Japanese customers is the most important factor for succeeding in
the Japanese market, Table 1. Interestingly, the five marketing factors
that received the highest importance ratings can all be considered to be
service components of a marketing strategy. These factors were: strong
personal relationship with the customer, after-sales service, short delivery
times, providing technical assistance, and translating product information.
Product adaption is also important to succeeding in the Japanese market.
In fact, all of the prefabricated housing manufacturers and almost 90 percent
of the export consolidators reported that they modify their product to
some extent to suit their Japanese customers. The most common types of
product adaptation include changing the design of the home to include a
tatami room and/or a genkan (Japanese-style entryway), using higher quality
materials in products exported to Japan, and translating product brochures,
installation instructions, and technical information into Japanese.
Respondents perceive JAS (Japan Agricultural Standards) and JIS (Japan
Industrial Standards) building materials certification and the Japanese
building code as non-tariff trade barriers that have a substantial negative
impact on the competitiveness of U.S. prefabricated houses and building
materials in Japan. Two other factors, the difference between U.S./Japan
construction technology and the inefficient transfer of U.S. construction
technology, were also perceived to be non-tariff barriers that restricted
the competitiveness of U.S. firms in Japan. It is interesting that in many
cases U.S. subsidiaries of Japanese trading companies perceived that trade
barriers had a greater impact on their competitiveness than did U.S. firms.
This was particularly true with respect to the complexity of the distribution
channels in Japan and import tariffs.
The majority of the prefabricated housing units exported from the U.S.
to Japan are manufactured using 2x4 construction technology. Most survey
respondents reported that this creates a problem because Japanese architects,
contractors, and carpenters do not possess a strong understanding of 2x4
technology. Many respondents also stressed that Japanese residential contractors
seldom utilize the construction management techniques widely used in the
U.S. As a result, construction costs are more than twice as high in Japan
as in the U.S. Perhaps more important from a long-term strategic market
development perspective is the fact that this lack of technological understanding
can adversely impact the quality of 2x4 homes built in Japan and reduce
their long-term performance. Either of these factors could potentially
erode the competitive position of U.S. prefabricated housing and wooden
building materials in the event that substandard products and/or product
performance adversely affects Japanese consumers perceptions of these products.
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Not surprisingly, survey respondents indicated that the efficient transfer
of 2x4 construction technology is an important component of their marketing
mix, with approximately 85 percent of the respondents utilizing some type
of strategy to address the issue of technology transfer. The three most
widely employed types of technical assistance are: providing customers
with installation instructions and/or product brochures, providing customers
with seminars and/or on-site technical training, and sending carpenters
and/or construction site supervisors to ensure the quality of the construction
work, Table 2. When asked to indicate what strategy would be most effective
in transferring 2x4 construction technology to Japan, almost half of the
respondents indicated that they favor providing technical training for
Japanese construction professionals.
The results of this study indicate that prefabricated housing manufacturers
and export consolidators in the Pacific Northwest are strategically poised
to take advantage of current housing policies in Japan that promote imported
housing and building materials. Despite the fact that many of the participants
in these industries are relatively new to the Japanese market, a large
number are already experiencing success. In particular, these firms have
demonstrated the ability to take advantage of the new competitive environment
in Japan by developing strong business relationships with their customers
and developing distribution channels that bypass the traditional extended
and costly distribution system. Given the strengthening Japanese economy,
the opportunities for imported housing and building materials in Japan
appear to be bright.
The results of this research project are presented in CINTRAFOR Working
Paper No. 60