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Tozai Group AG: new distribution paths for Swiss SMEs

Bridge to the land of the rising sun

Whilst European markets are expanding only slightly, those in Asia still have an enormous potential for growth. For small companies in Switzerland, however, the distances and cultural differences involved mean that entering these markets is far from easy. Tozai Group AG helps them to get a foothold in the Japanese market.

Anyone who is in a position to export his/her products to Asia is tapping one of the most promising markets of the future. By the Year 2000, the number of consumers with a level of income equivalent to that in Europe will have increased by 200 per cent to reach 400 million. And, as the experts know, Japan is the way into this booming market.

Although large companies have long been establishing links with Japan and expanding their branch networks, this is significantly more difficult for an SME to achieve. Some do not even consider the possibility ("too far away") whilst others have already tried in vain ("we were unable to establish a proper dialogue").

"Entry into Japan" was recognized by Daniel Isler and Heinz Zürcher as "a gap in the market". The two partners, who met at the School for Young Entrepreneurs at the School of Economics and Management (HWV) in Olten, decided to close that gap.

The third person in the group is their partner in Tokyo, Andrew Mankiewicz. Born in England, Mankiewicz had previously already worked in Japan for four years – for employers including the Italian Chamber of Commerce and Canon – and is well versed in local business practices. We have established bridges between the East – ‘To’ in Japanese – and West or ‘Zai’, explained Zürcher. "Hence the name of our company: Tozai". This link is not solely of benefit to Swiss partners however: since the Japanese market was shielded for a long period of time and was thus very difficult for foreign companies to penetrate with their products, the younger generation is now fanatical about Western products. According to Zürcher " SMEs in Switzerland should not allow this opportunity to pass them by. Indeed, ‘Swiss-made’ products are highly sought after". 

Tozai arrived at just the right time, as confirmed by Ivano Friedli-Studer, Manager of the Distillerie Studer & Co. AG and one of Tozai’s very first clients. Zürcher and Isler certainly cannot complain about a lack if interest in their export bridge – quite the contrary in fact. "We often have our hands full, simply dealing with all the necessary evaluations". Whilst Daniel Isler is mainly responsible for the strategic side of things, Zürcher establishes and nurtures contacts with clients. Isler commented "We form an ideal team. Heinz Zürcher is able to make optimum use of his abilities as a networker and I can fully apply my organizational strengths".

Affordable entry into the market for small and medium-sized companies

Tozai’s strength lies in its permanent presence in both countries. "We not only offer Swiss partners advice, but are able to provide any necessary evaluations and to establish contacts on site ". Tozai has a standardized business procedure. Each potential export product is first assessed free of charge in order to rate its chances. Using this documentation, Mankiewicz holds preliminary discussions in Japan to sound out the market. It is only if a fundamental interest emerges that Tozai Group AG concludes a contract with the client. Until such times as the product is launched on the market, the client is required to pay a fixed consultancy fee each month. Isler confirms: "The amount is intentionally low. It simply provides us with a sum to cover a share of the fixed costs". The next phase comprises more detailed evaluations of the market to allow a market strategy to be formulated. The product is presented to potential distribution partners. Zürcher emphasizes that "This is only possible by means of personal contacts. You cannot rush at things in Japan. Business relations must be established carefully – with the help of a few people to open the necessary doors".

Japanese businessmen have their own set of rules

Practices in Japan are completely different to those in Switzerland. In Japan, for example, the action of handing over a business card with one hand and placing the one you receive in your pocket with the other hand – as would be usual in Europe – would indicate a lack of interest or disrespect for the other person. In this part of Asia, a business card must be handed over using both hands and with a slight bow. The recipient should then study the card received before placing it in a case designed specifically for this purpose. Further explanations are essential with regard to Japanese legislation. Products must often be virtually redesigned for the Japanese market – as in the case of Distillerie Studer & Co. AG. Here it was a question not only of law but also of taste and habit: the Japanese do not drink beverages containing as much alcohol as those consumed in Europe. The ‘Japanese Kirsch’ was therefore just 20% proof and tastes distinctly sweeter than the Swiss original. It is only once all essential issues have been dealt with and the contract between the Swiss company exporting its products and the Japanese importer has been signed, that Tozai actually makes any money. Zürcher told us "In the first five years we receive a commission on turnover".

A great deal of work must be done before this stage is reached, however. It usually takes over a year to conclude a contract. In Japan – once again a cultural difference – business deals must be allowed to mature. "If we have already succeeded in achieving a break-even result in our first year of business, it is mainly due to the fact that we have worked extremely cost-effectively". To be more specific: an office service was appointed at the head office in Zug but most of the work was carried out from home – using a PC. This should soon change, however: the first deals have been made and others are on the horizon. In addition to Distillerie Studer & Co. AG, Tozai has a number of other well-known clients including Zimmerli Textil AG (exclusive underwear for men), the designer Michel Jordi, dieHasena AG (beds) and manufacturers of office furniture. Japanese export partners are already beginning to ask whether Tozai could not also offer the same service in the opposite direction. For Tozai, the future has only just begun.

Olivier Michel