P&g Japan: The Sk-Ii Globalization Project

P&G Japan: The SK-II Globalization Project

The Problem

The main problem facing P&G is their suffering product lines in Japan. Since they entered Japan in the 1960’s, their success and failures have been on an up and down trend line. When the company launches a new product line (example Huggie’s disposable diapers), they find that they are the market leader for the first few years and then they take a back seat to other innovators who make and market their product better and steal the market shares once help by P&G. With this knowledge of the up and down market shares P&G holds in Japan, the company faces major decisions with it’s high – end skin care line SK-II. The line shows a significant following in Japan (the leader of women’s beauty/skin care) but not a large market share. Some of the Asian GBU wants to see the SK-II line go global, while others are skeptical that it can handle other markets.

SWOT

Strengths

• Well established company, dating back to 1837
• Has entered 70+ markets
• A leader in product innovation (ex, disposable diapers, Swiffer dust collector)
• Organization2005 – a huge global restructuring of P&G’s organizational structure

Weaknesses

• At least 3 complete changes to the Global Business Unit’s structure in the last 15 years → instability in management
• Unable to retain market shares or position in Japan with skin care line SK-II and cosmetic line Max Factor
• Several failed Japanese launches
• The Japanese skin care and beauty lines were losing P&G millions of dollars per year
• Unclear direction of where to take SK-II between management and GBUs
• Struggling innovative R&D sector
• Extremely slow at new product launched, “Ready, aim, aim, aim, aim, fire.”

Opportunities

• A growing upper class of Chinese means a market for SK-II to compete in
• The Chinese market became available for international retailers
• Potential growth for SKI-II in home market of Japan → estimated doubling of sales in the next six to seven years due to economic growth
• P&G’s Olay line had seen successes in China
• Launching SK-II globally into markets of North America, the UK, and China →

•  The top four markets for global prestige products
• The US, China, and UK all have a two year growth rate of 17% or higher for Global Skin Care Market Sizes

Threats

• Japan’s bursting “bubble economy”
• Competitors are able to mimic their products at a higher level of efficiency
• High market sales in $ but low market share in %
• Chinese market offered a widespread existence of counterfeit prestigious products
• High Chinese import duties and tariffs would lead to very little overall profit

• Breakeven in the new market was forecasted for three years

• Competitors are already establishing their elite clientele in the global beauty care market so P&G would need to move quickly

Alternative Solutions

1. Launch the SK-II line in China in the cities of Shanghai, Beijing, and Guangzhou to target the “sophisticated, wealthy China.”

2. Due to high tariffs and unsure research in China, launch SK-II in UK and North American markets where the risk would be smaller.

3. Close the Asian Pacific P&G branch all together as it an unstable profit generating sector and occasionally losses millions of dollars annually.

4. Drop the SK-II and Max Factor Beauty lines in the Asian Pacific market and focus on “stacking high and selling cheap” products like toothpaste, cleaning supplies, laundry detergents etc.