Making China Beautiful: Shiseido and the China Market

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Problem: The chain-store distribution expansion strategy Shiseido is using in China is resulting in increased turnover, sales of counterfeit products and consumption of training resources. Analysis and Evaluation: Shiseido began its movement into China in the 1980s. First there was exporting, then a joint venture and finally, direct investment with the establishment of a manufacturing facility. During this expansion, the company’s goal was stay focused on Chinese culture and to create products especially for Chinese people. This was demonstrated many times; for example, the HuaZi line produced in China for Shiseido had a label on the back of the packaging that made a reference to the technological cooperation provided by Shiseido of Japan. Shiseido wanted to put out the message that the product was a Chinese one created with their help instead of the other way around. In addition, a separate line was created for Chinese women (Aupres) and it was advertised using Chinese models only. This strategy worked very well for Shiseido; in 2003, the Aupres brand represented 60% of the company’s total sales in China. This success led Shiseido to conclude they needed to create a network of chain stores to increase sales and market share. Shiseido introduced the voluntary chain store system in Japan in 1923. The idea was to have stores that would work cooperatively with the manufacturer. There was no franchise fee and the stores were not contractually bound to stay in the network for any specific period of time. Shiseido required the products sold by company provided representatives and that they were given exclusive retail space. This outlet strategy was extremely successful during Japan’s economic boom. The company had as many as 25,000 stores in the late 1990s. In 2003, Shiseido employed the same chain store strategy in China as it had done in Japan. The company established contracts with the stores...
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