P&G Japan SK-II Globalization Project

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P&G Japan: The SK-II Globalization Project

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Presented by

Syed Fawad Hussain MBA (Marketing)Bahria University Islamabad

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Paolo de Ceasare President of Max Factor Japan, the hub of P&G’s fast-growing cosmetics business in Asia.

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Alan LafleyHead of P&G’s beauty care GBU

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Major Constraints

Consumers, distribution channels and competitors were vastly different.

P&G’s global organization is in the midst of a 2005 restructuring program.

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Local Adaptivenss Meets Cross-Market Integration

“We must tailor our products to meet consumer demands in each nation, but

we must create local country subsidiaries whose structure, policies and practices are as exact a replica of the U.S Proctor & Gamble organization

as it is possible to create”Walter Lingle

VP overseas operaitons

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Birth of Global Management 7 divisions in P&G’s domestic U.S.

organization were broken down into 26 categories.

Replacement of International division with 4 regional entities: North America Europe Latin America Asia

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P&G Japan: Difficult childhood, Struggling Adolescence 12 years after entering the market,

the accumulated loss was $200m. Sales were decreased.

Causes of failure distinctive needs and habits of consumer. innovative capability of the competitors. complex Japanese distribution system.

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Organization 2005: Blueprint for Global Growth

1996-Jager COO: Development of new products as the key to P&G future growth.

Increased the budget for R&D. Closing of 10 plants and loss of

15000 worldwide workforce.

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Changing the culture

“ Great ideas come from conflict and dissatisfaction with the status quo”,

he said “ I’d like an organization where there are rebels”.

Durk Jager

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Changing the process

Performance based component of compensation increased from traditional range of 20% to 80%.

Extended the reach of stock options to virtually all employees.

Integrated business planning process reviewed and approved together.

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Changing the structure

Primary profit responsibility shifted from P&G’s four regional organizations to seven GBU.

Increasing efficiency by standardizing manufacturing process simplifying brand portfolios coordinating marketing activities

Eliminate bureaucracy and increase accountability.

Committee responsibilities were transferred to individuals.

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Industry environmental analysis: Porter’s Five force Model

JAPAN CHINA EUROPEThreat of new entrants

Low High Low

Bargaining power of suppliers

Low Low Low

Bargaining power of buy

High Low High

Threat of substitute products

High High High

Intensity of rivalry among competitors

High Low High

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The SK-II Decision: A global brand

Japanese Opportunity Japanese women were among the

most sophisticated users. Product innovation and superior in-

store service. Loyal SK-II consumer in Japan

spends $1000 a year.

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The SK-II Decision: A global brand

The Chinese Puzzle Relatively new company Second largest market in the world Major competitors are present Target prestige segment is growing

30%-40% a year. Chinese consumers were oblivious

about SK-II

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The SK-II Decision: A global brand

European market Large and sophisticated group of

beauty-conscious consumers. Crowded field of high-profile and

well respected competitors.

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The SK-II Decision: A global brand

PROS High margin product. High quality product. SK-II clear, unperfumed liquid makes it

distinctly different. Superior product technology and in-store

service. Japanese innovation with lipfinity. Good brand image in Japan. $9 bn worldwide prestige skin care market.

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The SK-II Decision: A global brand

CONS SK-II not in line with P&G portfolio. Little brand awareness outside

japan. Difficulties translating product

value in western society.

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Recommendations

P&G should consider rolling out the SK-II product line to the international market.

Decision should be based on current resources and capabilities.

P&G should continue to concentrate its efforts in Japan to further penetrate and grow its share.

Paolo and its managers must understand the forces that shape competition in the external environment.

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