Reexamining the Classification of Market Learning: A Case Study of 30 Years' History of Diaper Wars in Japan (2010)

ABSTRACT In this paper, we use the historical case study of the formation and expansion process of the disposable diaper in Japan to examine the importance of learning for developing new products and achieving a competitive advantage. First, we review the literatures on 'market orientation' that stress the importance of creative learning from the market. In previous research, learning has been understood in several ways, depending mainly on its subject (competitors or customers), and its objectives (response to expressed needs or latent needs). We then conduct a case study of the disposable diaper in Japan, to examine the effectiveness of this learning. Through the case study, we find that in the 1980s in particular, when the was growing, dialogical learning via competition among firms played a crucial role in the diffusion of innovations and development of differential new products. Then, after the 1990s when the disposable diaper matured, only Unicharm succeeded in building an overwhelming competitive advantage. By routine observation of customers' needs, Unicharm discovered a latent need and developed the pull-up pants-type disposable diaper. Lastly, we discuss implications from the case study and reexamine the classification of proposed in the literature. THEORETICAL BACKGROUND Market Orientation and Creative Learning from the Market The importance of learning from the served has been recognized within existing marketing theories and practices. In fact, conventional marketing concept theory states that a firm should base its business on what customers need, known as customer- orientation (e.g., Kelley and Lazer 1958, Levitt 1960). However, reacting to expressed customers needs is usually inadequate for the creation of competitive advantage (Jaworski and Kohli 1996), in part because competitors might find the same customer needs and enter into the same opportunity. Therefore, learning requires broader information, not just involving expressed customers' needs but also latent customers' needs and moves of competitors. The idea that firms should not to adapt to customers' needs but should learn creatively from the market, involving competitors, was conceptualized as market orientation in the 1990s (e.g., Day 1994, Deshpande, Farley and Webster 1993, Kohli and Jaworski 1990, Narver and Slater 1990, Slater and Narver 1995). The existing literature on market orientation revealed empirically the positive relationship between the capability for creating, sharing, and utilizing intelligence and business performance such as profitability and new product success. However, the concept of in existing research is said to be composed mainly of two different stances. Narver et al. (2004) point out that is divided into responsive orientation and orientation. orientation, whereby a business attempts to discover, understand, and satisfy the expressed needs of customers, is referred to as customer- led (Slater and Narver 1998) or customercompelled (Day 1999) in existing literatures. Responsive is the component of on which existing empirical research focused. At the same time, proactive is a set of behaviors in which a business attempts to discover, understand, and satisfy the latent needs of customers. Although the satisfying of latent needs has received some theoretical comment in analyses of (e.g., Kohli and Jaworski 1990, Narver and Slater 1990, Slater and Narver 1995), there are few systematic empirical analyses. Narver et al. therefore developed a valid measure of proactive and examined the relationship between two forms of (responsive and proactive) and new product success. …