and MASAAKI KOTABE The Japanese market holds much promise for U.S. firms as new forms of doing business evolve. Mail-order and nonstore retailing are becoming part of the daily consumer landscape. Likely to be even more prominent is the ability to conduct business in "market space" rather than the traditional "marketplace." Global e-commerce offers alternatives that bypass many traditional entry barriers into Japan. According to a recent international study on Japanese distribution strategy published by the American Marketing Association, U.S. firms are better positioned to take advantage of such opportunities than Japanese members of the distribution system because Japanese industry is lagging in its implementation of information technology.

Why aren't more U.S. firms in the Japanese market? The answer lies in the numerous Japanese market barriers, key to which are the "keiretsu": the set of intimate relationships among Japanese suppliers and manufacturers that lock up the Japanese distribution system. These practices, however, are beginning to change in the wake of Japan's decade-long recession, when many keiretsu companies experienced severe asset deflation and lost control of member companies' shares.

Many traditional barriers persist, however. Relative to other markets, real-estate prices, labor costs and freight charges remain high. The need also remains to offer channel members high levels of service, substantial financing and frequent rebates.