The Harman Group has a number of prominent brands under its umbrella.  A number of fervent new products, such as the S9800SE, are introduced from its principal brand − JBL.  In addition, new products are introduced from Mark Levinson after a period of no product delivery, and finally lit a signal flare of its endeavour towards its brand resurrection.  We ask about strategy and future development to Mr Yasuda, who is the president of Harman International Japan − a Japanese entity of the Harman Group.

Realisation of sales at the same level as the previous year even under the tough market situation

- First of all, please tell us on trends in the domestic high-end market.

Yasuda (Y hereafter):  Luxury audio and luxury AV markets in Japan cannot be said to be prosperous or active, and the gap between winners and losers has been widening.  However, there are a number of people who purchase high-end audio equipment regardless of market situation. I believe the market is big enough to justify our effort in doing well in the future. There was a period in the 1990s so-called bubble economy when the high-end market rapidly expanded, but we need to consider the present tough situation is a normal condition rather than particularly a depression.  We have been working with manufacturers to formulate strategies to ensure our firm position in such a market scale.

Our business has been about the same level as last year.  We had difficulties from no sales of Mark Levinson products for some period, but JBL, which is our main pillar, has been robust.  We started distributing luxury cables from Siltech, and the brand has been infiltrating steadily though the business scale is not so big.

- JBL introduced many new products along with the S9800SE.  Please tell us on the background of these developments.

Y:  JBL will celebrate its 60th anniversary soon.  In the latter half of the 1990s, JBL was somewhat stagnant in its self-innovative product development, but has been very active in eager and innovative product development during the past few years.

JBL is a very unique existence among loudspeaker manufacturers around the world.  Most of loudspeaker manufacturers source speaker units from other companies and design own crossover network in order to design loudspeaker systems.  Many of them also source enclosures from outside companies.  On the other hand, JBL have capability to do all in-house − from design/development of speaker units to final processes of cabinet built as well as finish.  This type of loudspeaker manufacturer is very rare worldwide, and we consider it as the strength of JBL.

As JBL has a wide range of product line-ups - starting from relatively casual to high-end, it has different production lines depending on product types.  For instance, as high-end products like the K2 must meet very strict quality criteria, production of high-end products is separated and independent from other production lines, with its own production facility and staff, and the area is called high-end cell.

- Please explain JBL’s policy on products.

Y:  JBL’s basic stance on loudspeaker development can be categorised into 3 main points.  The first point is that units come first.  Drivers in a loudspeaker are like an engine in an automobile.  Constantly developing innovative units is the fundamental of JBL’s loudspeaker development policy.

The second point is to produce products with high level of accomplishment as industrial products.  Since consumer products are hobby items, simply excellence in units is not sufficient.  By having excellent units as a core, the key for success is to complete loudspeaker systems with good overall balance of design.  Systems might well have superb sound, and JBL makes sure that its products are acceptable aesthetically with an excellent perceived value in the living environment at home.

The third point is pricing.  Products gain value when consumers purchase them.  It does not make sense if a product price is beyond reach of the consumer.  However, this does not mean to compromise in performance and quality over a priority in pricing.  By being creative and cost-efficient in design and construction, one can create enticing products without sacrificing quality and performance.

Keep pursuing the next pinnacle without satisfying the present

- Such a thought runs in the S9800SE, does it not?

Y:  The most significant epoch-making product introduction in the past 4-5 years was the S9800 on 11 September 2001.  As a result that all drivers were newly developed for it, such derivative products as the 4348, S5800, S4800 utilise drivers of this family.

The S9800SE that was introduced last June is the latest model in this family.  Cabinet is available in 2 finishes − brown wood type as the existing “WG” and black-lacquered wood “BG”.  As there are many users with the original S9800 models, we shall offer upgrade service.

JBL always continue to evolve and improve its products.  The S9800SE is the same.  This product was not market-driven.  Greg Timbers, who is so-called Mr JBL, came up with this product by improving network after 3 years have passed from the introduction of the original S9800.

The market constantly demands progress.  The most difficult thing in product development is to come up with new products which need to supersede own past products on a continual basis.  The object of competition is one’s own, not others.

- One should not be content with one's tradition.

Y:  Greg Timbers’ most favourite expression is “NEXT 1”.  This is an expression from Chaplin’s film, and shows Greg’s attitude to aim at next pinnacle.  The toughest difficulty which the successful fall into is a weakening of one’s attitude toward constant self-improvement.  Without a break-through to this situation, the manufacturers and the industry look like a standstill.

Many noteworthy products from the JBL brand

- There are many other noteworthy products than the S9800SE.

Y:  The 4312D and 4318 bookshelf monitors are a couple of special-feature products in the same family.  The 4312 Series, which is bookshelf monitor speakers, has nearly 20 models during the last 35 years, and its accumulated sales are over 300,000 units.  During this period, units have evolved without changing the fundamental.  However, a new-generation model has been introduced.

The largest feature is that all 3 units are renewed.  Unit modifications have been done repeatedly until now, but this is the first time to develop all new units.  These newly developed units will be the cores of monitor series of next 5 to 10 years.  In this sense, the 4312D and 4318 are epoch-making models.

The most noteworthy model among new autumn models is the 4338, which is a large monitor system.  In addition to its presence of a 15-inch 3-way model, sound from the system with the distinctive newly developed horn is on an extension of the traditional JBL sound, and I am sure this will satisfy JBL fans.

- What about other new products?

Y:  In the high-end JBL line headed by the highly reputable K2 Series products, anticipated centre speaker and active subwoofer for high-end home theatre system will be added.  In addition, over 10 new models that can be used for both pure audio and home theatre purposes will be added into our line-up within 2004.

Although the market condition is rather stagnant, the market size will further shrink unless there are attractive products to allure the consumer.  JBL releases many new products into the marketplace towards the end of the year, and our hope is that this will in some way be a big stimulus to the market.  We hope that this thought of ours will be understood by people at retailers and help their business.

- As the environment is tough, attractive products are expected, are they not?

Y:  While we clearly understand the tough market condition, nothing will change just by sighing over it.  On the other hand, we consider that our task is to stimulate the market by developing and offering attractive products, whose attractiveness will be greatly appreciated by the consumer.

Developing common strategy with manufacturers as a member of the same group companies

- In order to be successful in the Japanese market, it is necessary to inform the overseas manufacturers on the market requirements in Japan.  What do you say about this point?

Y:  There is a risk of losing one’s uniqueness if one goes too closely along with market requirements at the time of product planning.  If one proceeds only relying on one’s uniqueness, one ends up with being separated from living up to the reality of the market expectations.  While maintaining its brand personality, how you can diversify it to suit the market needs?  Balancing these potentially conflicting factors is the most important thing.

During the bubble period, JBL used to pursue the volume of sales as well as market share.  JBL is not like that now.  The management strategy has shifted to secure firm profitability while the brand value is further improved.

Past several years, we have very close relationship with the JBL headquarters in the US and come to a mutual understanding.

We inform JBL adequately on characteristics of Japanese market, but this should not result in loss of their personality.  It should be the first priority.  The reason we import products of overseas brands is that their products have attractiveness that cannot be found in Japanese products.  If such uniqueness is lost, there is no reason or value to import products from overseas for the benefit of Japanese consumers.

- Your company is a Japanese entity of the Harman Group, and you are different from normal distributors.

Y:  We carry various brands, but our core business is JBL and Mark Levinson, both of which are Harman brands.  These company and we belong to the same company group, and we have close relationship as brothers or relatives at the personnel level.  In this sense, we are different from trading companies that have no financial and personnel level of connection with the manufacturers.

From the viewpoint of the Harman headquarters, Japan is one of markets around the world.  However, our constructive proposals and opinions on brands’ future seem to play some important role in worldwide strategies of brands.

So, it is not merely a remark of a Japanese distributor, but it is rather an opinion of colleagues who are part of the common worldwide strategies of Harman brands.  The same thing can be said to JBL and Mark Levinson.

Further the added values of overall group through success in the Japanese market

- JBL seems to collaborate actively with companies in different industries.

Y:  The Harman Group is engaged in OEM business under its own brands with the automotive industry and computer industry.  In the automotive and PC industries in past several years, there are world-wide strategies of increasing added value to their products by using speakers or audio system of brands which have high reputation in the consumer field.  JBL and Mark Levinson have exclusivity agreements on a global basis with Toyota.

The Harman Group also has exclusive product supply agreements with Mercedes-Benz, BMW, etc.  Not only audio but also navigation systems are installed as complete systems under Harman brand names.  The computer industry has the same trend.

Harman Japan in the Harman Group is not merely to sell products from JBL, Mark Levinson, etc. in the Japanese market.  By increasing value of each brand in the consumer field, we play an important role in overall Harman Group strategy.

- So, you are an important player in driving the group strategy.

Y:  Harman International is listed on New York Stock Exchange.  Brands like JBL and Mark Levinson receive high appraisal in Japan, and this makes the shareholders and other interested parties in the US to recognise the high value of these brands and their products.

Japan is well known for the most critical country in the world in terms of product quality.  To be successful in Japan is regarded as recognition of high quality within Harman companies.  Success in Japan counts not only tangibly for local business but also intangibly for enhancing the entity of our Corporation and its brands to serve our Corporate global strategy.

Japan is an advanced audio country in Asia.  Countries like China, Taiwan, Hong Kong, Korea, Singapore and Indonesia closely observe Japanese audio situation.  The audio brand positioning in the Japanese market is very important in a sense to cause a ripple effect to the other part of Asia.

On the contrary, we also make use of the moves at the HQ side.  Eric Clapton, who performed in Japan last year, is touring the world this year under “World Tour 2004”.  JBL Professional speakers are used in these concerts and JBL is the principal sponsor.  This is why we are using Clapton’s images in our JBL brochures and posters.

Mark Levinson made a move for resurrection

- Mark Levinson announced new products after a long time, did it not?

Y:  Mark Levinson, established in 1972, has now a 32-year history.  At the time of establishment, it was a brightly shining new star in the audio industry.  Brands gradually mature as time passes.  It is not rare for brands to weaken their brightness and self-progressive element over years after maturing to some extent.

After more than 30 years, Mark Levinson started showing a similar tendency.  It became necessary to adjust manufacturing process and cost management to meet the changes and expansion of business scale in this technologically, economically and culturally evolving environment today.

Under the Harman umbrella, there are brands − Lexicon, Harman Kardon, Crown (Amcron in Japan), Soundcraft, etc. −, which manufacture electronics products, in addition to Mark Levinson.  Each brand used to procure parts independently, but sharing information within the Group, synergy effect in parts procurement − e.g., pricing − is created.

Efficient part procurement and usage and overall ground design is indispensable in modern management.  This does not lower product value by itself.  Rather, reinforcing product line-up leads to positive influence to the market.

- You needed time to formulate new business strategy.

Y:  Mark Levinson, in the mentioned situation, reviewed its activities from the long-term strategic point of view and courageously decided to make the change even if it creates a temporary inactivity.  During this period, we created a lot of worries and troubles to everyone in the marketplace.  As the head of the distributor in Japan, I would like to apologise to everyone at dealers.

A new structure has been finally established at Mark Levinson.  The factory in Connecticut was transferred to Massachusetts, and production has already resumed.  2 new models will become available this autumn.  Further, new products will be introduced next year and following years.

As to Mark Levinson, we, in co-operation with the HQs in the US, pursue aggressive sales activities during this autumn and winter season.  As JBL has been rapidly reinforcing its product line-up during the last several years, we would certainly like to successfully revive Mark Levinson.  As we with new products are determined to resume our activities with redoubled energy, we would like to have supports from everyone at dealers.

A new product bearing a model name which is a combination of No.32L and No.26SL

- Mark Levinson brand has basically focused on 2-channel pure audio.  Would this be maintained from now on?

Y:  2-brand approach was taken in the past − 2 channels were for Mark Levinson and multi-channels were for Proceed.  From now on, Mark Levinson, as a single brand, will handle both 2-channel and multi-channel fields.

When the Mark Levinson brand was established, audio meant 2 channels.  With changes over years, multi-channel and AV elements were added to 2 channel audio.  This trend has become prevailing, and Mark Levinson is required to cope with this situation.

However, the degree is different from a market to market.  The US has the highest demand for high-end AV.  Worldwide trend is also toward this direction, even in Europe and Asia, but Japanese high-end audio market falls behind this audio-visualisation trend.  In Japan, the pure-audio market for Mark Levinson will continue to play a significant role.

In this situation, Mark Levinson evolves on 2 product pillars of pure audio products and of AV products.  The most important attribute of Mark Levinson will continue to be the excellent acoustic performance, regardless of pure audio products or AV products.

- Could you explain about the positioning of new products in the new strategy for Mark Levinson?

Y:  2 models of preamplifier are introduced at this time.  In general, high-end brands have more amplifier products than preamplifier products − for instance, 1 preamplifier vs 4-5 amplifiers.

As a high-end preamplifier, Mark Levinson introduced No.32L several years ago, and it is still regarded as a top-notch product in its kind and price.  The new 2 models are positioned below No.32L.

The model name is No326S.  Although No.326S is a lot lower price than No.32L, the expectation to this model resulted in a model name, which is a combination of No.26SL, which was the former successful flagship in the 1990s, and the current flagship No.32L.  A little brother version No.320S will also be available very soon.

Sales of Mark Levinson have been very close to zero for nearly a year.  Since I as a member of sister company understood in details on the situation of Mark Levinson resurrection, I waited for the day when Mark Levinson rises again.  Although we are sorry to dealers, the day now is just there.  I am filled with a thought that the day will come as soon as possible.

Contribute to revitalise the market by introducing new products constantly

- There must be a large expectation in the revival of Mark Levinson that belongs to a huge Harman Group.

Y:  High-end electronics manufacturers are small scale without exception.  Their employees are only a few to several dozens and sales/profit/investment scales are naturally limited.  In an age of technological innovation at this increasing speed, there is barely any manufacturer that can foresee it, and manufacturers must anticipate it in times to come and develop new models each year.  For instance, if a product development requires 2 years by a development team consisting of 5 people, labour and development expenses create substantial financial burden.

In the high-end world, it is said that unique products tend to be developed by only small-
scale companies, but this is a misunderstanding.  It is ideal that those who have the fundamental capability and resource have correct vision as well as strategy and exert correct leadership.  However, large companies lack good understanding on the high-end world and result in incorrect vision and strategy.  In other words, it could be a waste of resources.  Under the Harman umbrella, it is the strength of Mark Levinson since it exists as an independent organisation specializing in high-end audio.  This means to have necessary investing capability and structure − human resource, research facility and measurement equipment − that is required for continuous new product development.

- Finally, if you have any message to dealers, please feel free to mention it.

Y:  Toward dealers, it is our best contribution that we offer products that contributes to their sales.  In the past year, we are sorry that we created problems with regard to Mark Levinson.  Finally, new products will become available.  We shall resume our activities with redoubled energy, hoping to compensate the recent problems.  JBL also comes with powerful new products.  Please have great expectation for new products, and please also support us.