Supreme Canning Company

The Supreme Canning Company (the true name of the company is disguised) is an independent
US packer of tomato paste and other tomato products (whole peeled tomatoes, chopped
tomatoes, tomatoes and zucchini, ketchup, tomato paste, and pizza and other sauces). The
company is located in the state of California. Although it produces some cans with its own-
brand label, much of its output is canned for others and their brand names and labels are put on
the cans. It produces shelf-size cans for eventual sale at retail, and gallon-size cans for use by
restaurants and industrial users. It also packs tomato paste in 55-gallon drums, and in plastic
containers holding approximately 0.7 cubic meters (with the flexible plastic container held
inside a heavy shipping container). Supreme Canning Company’s annual processing capacity
is in excess of 100,000 tons of tomatoes (processed during an operating season of approximately
three months).

Supreme Canning Company, along with other US producers, was pressed by a combination of
heavy competition from factories overseas (particularly in Italy) and inadequate domestic
demand. Tri Valley Growers, California’s largest agricultural cooperative and processor of 10%
of the canned tomato products sold in the United States, had gone bankrupt in 2000. A surge in
demand from Italy, which decreased its imports from China in 2003–4 when the SARS
epidemic occurred, provided a temporary increase in demand for Californian tomato paste. But
Supreme Canning Company still needed additional markets.

One potential bright spot for the Supreme Canning Company had been the possibility of getting
into the Japanese market. Japan was reducing trade barriers and attempting to encourage
imports. At the same time, the popularity of pizza and Italian-style foods and restaurants had
grown rapidly, creating an increased demand for specialty tomato products. Because of the
scarcity of land, the nation had not gone into the large-scale production required to support an
economical domestic tomato-canning industry. The insistence of Japanese consumers (and
companies) on high quality had resulted in relatively low sensitivity to the prices of food
products.

An inquiry that had been received from a food packer and distributor in Japan indicated interest
from that side. The Japanese firm handled a large number of products, was well known in Japan,
and was much larger than the US firm. Since Supreme Canning Company did not have well-
known brand names of its own, it was interested in acting as a large-scale supplier of products
made to customers’ specifications for use by the customer or distribution under the customer’s
label. Thus the inquiry from Japan was most welcome.

The Japanese company invited senior executives of the US firm to visit their production
facilities and offices in Japan. Both the president and chairman of the board of Supreme
Canning Company had a four-day visit with the executives of the company in Japan. The
president of the US company, who had some knowledge of Japanese business practice from
studies at Stanford University and from his widespread reading, attempted to act as a guide to
Japanese business practice. The chairman of the board had little knowledge of Japan, and
viewed himself as a decisive man of action. Although there were a few minor
misunderstandings, the visit was concluded successfully and the Americans invited the
Japanese to visit their plant in California for four days.
The Japanese indicated their interest in the signing of a mutual letter of cooperation. The
chairman of the board of Supreme Canning was not interested in this, but rather wanted some
specific agreements and contracts. As the time for the Japanese visit to the United States drew
near, the Japanese indicated that their president would not be able to come. Some senior
executives would be able to meet, but they would only be able to spend two days instead of
four. The vice-chairman of the board of the Californian company wrote asking why the
Japanese were not going to send their president, and inquiring why they could not spend four
days instead of two, ‘as we did in Japan.’ The letter was frank and direct. The tone was that of
a person talking to an equal, but not with any great deal of politeness. The Japanese company
decided to cancel the visit, and no further negotiations or serious contacts were made.

Analyzing the situation, the US company realized that it did not understand:
 the Japanese preference for getting to know people well before doing business;
 the significance of a letter of cooperation (which could be expected to be a first step in
concluding a long-term business agreement);
 the status relationship in Japan of little companies to big ones (larger companies have
greater status, and their managers are shown greater respect);
 the status relationship in Japan of sellers to buyers (buyers have greater status, and their
managers are shown greater respect).