In “P&G Japan: The SK-II Globalization Project” case study, the author Christopher Bartlett presents the P&G’s plan of pushing SK-II as a global beauty product. In late 1999, Paolo de Cesare, President of Max Factor Japan, had given an idea to the Global Leader Team (GLT) of P&G’s Beauty Care Global Business Unit (GBU) that whether it was a good idea for pushing SK-II to become a global P&G brand. Since the product was successful in Japan ($150 million in sales in 1999), P&G then was considering in expanding its SK-II to be distributed worldwide.
There was also an effort of the Global Growth strategy of P&G at that time as an influence factor to support SK-II as a global brand. Durk Jager, Chief Operating Officer, had been set up Organization 2005 (O2005). O2005 was dealing a developing of new product and quickly launch out worldwide. The O2005 strategy could bring more annual earnings growth and company’s annual saving. On the other side, there was also a cost of restricting, closing plants, and job losses in the first five years. Later, Paolo de Cesare got a promotion as a global franchise leader for SK-II.
In promoting SK-II as a global brand, he came up with three alternatives of opportunities. The first choice was introducing the brand into mainland China. The second choice was a chance of introducing SK-II to Western market. The third choice was working on the successful home Japanese market. Considering these three alternatives, Paolo de Cesare knew that his decision needed to able to work well with company’s ability and structure. Developing from a local focus to global focus was one of many tasks that challenged P&G in order to develop its ability.
Problems Identifications Did SK-II have the potential to develop into a major global brand? Which markets were the most important to enter now? How should company and its global strategy implemented in P&G’s newly reorganize global operations? SK-II’s Target Market Analysis Market alternatives Introducing the brand into mainland China. Introducing SK-II to Western market. Working on the successful home Japanese market. Paolo de Cesare, a person in charge of SK-II global, realized that there were significant risks in his proposal to expand SK-II to China and Europe.
Even though there was a huge success in Japan, it didn’t guarantee for the same outcome of other countries which have different in customers, distribution channels, and competitors with Japan. I have analyzed the skin care industry external environment factors of each P&G’s target market, China, Europe, and Japan as follow. China, there are so many industries try to enter Chinese market including beauty care industry. There are high growth rates of high-end line beauty care products which bring a high rate of new entrance. Even though Chinese market consists of new comers and exiting firm, the rivalry among existing companies is low.
This is because the growing of beauty care market. The growing of beauty care market could reduce pressure of firms to compete each other in order to fight for customers. In Chinese market, there are so many existing global brand and they produce high innovative products. Thus, the threat of substitute products is high. Pricing has a role to bargaining power of buyers. According to the case, pricing is very sensitive to Chinese people. Since SK-II is in a high-end line, the price is expansive. In order to justify the premium price, P&G could add a service component to have customers feel more special.
The bargaining power of suppliers for Chinese market is low. Europe, the beauty care products in European market are very significant. There are also world well-known brands already existed there such as Estee Lauder, Lancome, Chanel and Dior. In addition with some regulations of region such as taxation could bring a difficulty for new entrance. Thus, there is low threat of new entrance. Those major competitors of P&G are the world beauty care firms, thus there is a threat of rivalry among exiting company and the threat of substitute product is high.
The bargaining of buyers is also high. This is not because of price or choices, but because of loyalty to the brand. For bargaining of suppliers, European market has low threat with the same reasons as Japan and China. Japan, according to the case, Japanese women are the heaviest users of beauty products in the world. Moreover, to calculate as one person usage, they are the world’s leading consumers of beauty products. Since there is a high demand, thus there should be a high supply to meet with those demands.
In Japan, there are so many beauty care industries which produce good quality of beauty products both on high-end line and mass market. There are also more choices or substitute products from P&G’s major competitors such as Shiseido and Lion. The rivalry of exiting company is high. Since there is an attracting demand, there should be more new entrances that interested in this industry. However, for beauty industries in Japan, the bargaining of supplier is low because mostly the companies have their own resources, researching labs, and factories which they don’t have to rely much on the suppliers.
In conclusion of these three target markets, they all have no threat of bargaining suppliers since P&G has its own resources, researching labs, and factories in each country when P&G has decided to enter that country. However, the important role of threat is from the bargaining of buyers and threat of substitute products. This is because there is variety of high quality and innovative beauty care products in those markets, thus buyers have more alternative in purchasing products.
P&G need to work hard and do more research and development in order to produce higher quality, more innovative, and more unique in products in order to answer consumer’s need and compete with those major world brand competitors. Implementation of P&G and SK-II P&G set up the newly reorganized global operations. I’m going to explain how the company works with its new global operations strategy and how P&G could push SK-II to world brand by using P&G’s target market – China, Europe, and Japan.
By using the implement of Organization 2005 (O2005), the company is expected to have more annual growth rate together with less expense. P&G gives more compensation along with more responsibility tasks. P&G allows every employee in company to hold firm’s stock. P&G transferred primary profit responsibility from P&G four regional organizations to seven global business units. For China, the company should first consider in building a strong brand in China. SK-II should be expressed clearly to target customers. Company then provides knowledge in using skin care up to six or eight steps.
One more considering point is that there is high import duty. Thus, company should minimize the cost to make product profitable. For Europe, in order to have a chance in European market which crowded with world well-known beauty care brands, SK-II need to be launched in unique distribution channel from other P&G products. P&G could add beauty consultant as a service offering. For Japan, P&G should come out with higher quality and more innovative products. The company could do more research in order to produce new product with new Japanese technologies.
P&G should build a strong brand of loyalty. Conclusions From the significant success of SK-II in Japan, P&G had an intention to push SK-II as a global beauty care brand. In order to become successful in global market, P&G needed to restructure company’s culture, processes, and structure through a global growth plan called Organization 2005 (O2005). Post-O2005, company should gain more annual growth and more annual saving. The company’s manufacturing processes, simplifying brand portfolios, and coordinating marketing activities should be standardized.
In order to have SK-II enter foreign markets such as China and Europe, P&G need to build a significant and strong brand for SK-II in order to compete with exiting global well-known brands such as Dior, Estee Lauder, Lancome, and Chanel. Company need to market research. Company need to analyze who are the competitors, do they have strong power in the market, and how to make SK-II be visible among the market. Moreover, company need to study on target customer characteristics. P&G need to know what the beauty care products their customers prefer, how many steps of skin care they usually do, and how to get attraction from target customers.
After company analyzed those opportunities and risks, company shall enter the country which they see the possibility to be successful in the beauty care market. The most important point is that P&G need always do a product research and development. By doing R&D, company could come out with better quality, more innovative, and more technology SK-II products. If the company always improves the products, customers will always give an attention to the brand and become loyalty to the brand later on. Recommendations Recommended
I recommend P&G supports SK-II to enter China. Even though China consists of high import tariffs and the risk of counterfeit product, the demand and growth of beauty care market is high. Thus, it is better to enter the Chinese market before the growth of market slow down. I also recommend P&G support SK-II to expand the SK-II product line in Japanese beauty care market. Japan is the home country for the SK-II, and has already established a successful market for the product. P&G needs to focus more on research and development of new product.
Company should come out with better quality and more innovative products. The plenty of SK-II product line can help in creating the successful brand in other countries. Do not recommended However, I do not recommend P&G support SK-II to enter the Europe. As I have mentioned about a strong environments and threats of European market, there are too many risky for P&G entering European beauty care market such as the exiting world brand competitors, skin type, and high cost of production and advertising. I think it is hard to push SK-II to be visible and successful in European Market