Mcdonald's Dominates In Japan -- Marketing Creates Super-Sized Success Of Fast-Food Chain

TOKYO - Suketaka Kawazu, a 25-year-old salesman for an air cargo company, sips his hot chocolate as testament to the brilliance of McDonald's marketing.

After lunch at a Tokyo McDonald's, he said he thinks the hamburgers actually taste better at MOS Burger, a Japanese competitor. And he can't identify any particular warm feelings about McDonald's or its image.

"I guess it's American, if you think about it," he said, shrugging. "But I don't think about it."

Still, he faithfully eats at McDonald's at least once a week.

It is on the basis of this loyalty that McDonald's has embarked on a massive expansion effort in Japan that's expected to see the chain grow from 2,000 restaurants to 10,000 in the next 10 years, likely squashing competition and becoming a model for McDonald's growth worldwide.

You could call customers like Kawazu somnambulant and perhaps ready to be wooed away. But the truth is that after 25 years in Japan, the Illinois-based fast-food giant has achieved marketing dominance. McDonald's is the restaurant you go to for a fast hamburger meal.

"If you're thinking of doing something in the fast-food industry, it's not a good idea to go with hamburgers," said Kuniyoshi Akima, sales manager of Dairy Queen.

Dairy Queen officials have replaced hamburgers with pita sandwiches on the menu at its 100 Japanese stores because of competition from McDonald's.

In the United States, McDonald's trend lines have been as limp as a day-old French fry, with sales at restaurants that have been open at least a year declining. That reportedly has spurred the company to propose a big price-cutting campaign. .

McDonald's U.S. troubles, however, make its success in Japan stand out more.

The world's biggest restaurant operator, McDonald's claims 60 percent of Japan's $5 billion hamburger market. It accounts for 10 percent of beef consumption in Japan and 1 percent of restaurant sales. McDonald's chief in Japan, Den Fujita, is aiming for 5 percent.

With 2,000 stores, McDonald's is within easy reach of most consumers downtown, at the train station or in the suburbs. To get to 10,000, it is pushing into smaller spaces and more creative locations, such as schools and factories, just as it has done in the United States, where McDonald's are tucked into Wal-Marts and Amoco gas stations.

McDonald's is found in landmarks such as Tokyo Tower, an Eiffel Tower-like observatory.

A big part of the company's expansion will come from agreements Fujita made with two Japanese oil marketers to combine McDonald's with gas stations. The move is significant because self-service gasoline comes to Japan next year.

The credit for McDonald's success in Japan goes to Fujita, 70. He brought McDonald's to the country in 1971 and runs it as a joint venture with the U.S. parent, which splits the investment and the profits.

Fujita, who has written six business books runs McDonald's by his will. He meets with McDonald's officials four times a year, but they give only advice.

Nearly all his stores are company-owned because Fujita does not want to lose control of marketing decisions. The only franchising is through an incentive system for loyal employees.

In Fujita's latest book, "Winning is Everything," he advocates American-style, top-down management over the Japanese bottom-up, consensus-building system.

"All the knowledge and experience top executives accrue is for decision-making," he wrote.

For example, two years ago the company began aggressively cutting prices after it ran a hamburger promotion and saw sales jump by 20 percent.

Taking advantage of the company's buying power and the strength of the yen, Fujita cut the price of a hamburger from 210 yen ($1.75) to 130 ($1.08). A special value meal of a hamburger, medium fries and medium drink is $3.33. At MOS Burger, where the drink and fries are smaller, a comparable meal is $4.08.

These days, the yen's value is dropping, and that is causing a headache for Fujita. He buys his potatoes and beef in dollars from the United States, so if the dollar, trading above 120 yen, hits the 130 mark, Fujita may have to raise prices.

But judging by McDonald's success, the toughest decision has been made in shaping the chain's image.

When he opened McDonald's in Japan, Fujita chose not to piggyback the chain on its American roots. He kept U.S. flags and other imagery out of the stores. And for a name, he spelled McDonald's in Japanese, so it comes out as "Mack-u-dona-rudo."

"You know, the Japanese are basically anti-foreigner," Fujita said. "The Japanese don't like anybody. It's a small island, and we don't like Korea. We don't like China. We don't really like America because of the war."

But the Japanese like foreign brands, he said, so he was careful to nurture the McDonald's image. The advertising tugs at the heartstrings as McDonald's U.S. commercials do, but the families are all Japanese and maybe even wearing a kimono.

On the menu, the food is traditional McDonald's - with a few exceptions: This month's special? A teriyaki burger with a fried egg.

It may be apocryphal, but it's often said that Japanese children who travel to America are surprised to see the United States has McDonald's, too. Others know about McDonald's but think it's a different chain than Mack-u-dona-rudo.

"Japanese people don't think McDonald's represents America," he said. "It's hamburgers. Hamburger may equal America, but they don't think so deeply. They just think McDonald's and hamburgers."