P&G Japan

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Probable questions
1. Does SK-II have the potential to become a global brand within Procter & Gamble’s worldwide operations? Why or why not? 2. Which of the three market options should Paulo Decesare recommendation to the GLT? What benefits do you expect to gain? What risks do you see? 3. How Should he implement your recommended option? What are the implications for P&G’s new post-O2005 organization? What support and/ or resistance do you expect? How will you manage it? 4. Why was SK-II so successful in Japan? How is it creating value and what is the business model? 5. How transferable is this model and what are barriers?

P&G Japan: The SKII Globalization Project

GLT – Global Leadership Team
GBU – Global Business Unit

Alan Lafley – head of P&G’s Beauty Care GBU
Paolo de Cesare – President of Max Factor Japan

Lafley’s organisation and budget, which would support the global expansion of SK-II

Need evidence of the transferability potential of a brand

Constraint – bold but disruptive Organization 2005 restructuring program GBUs took over profit responsibility historically held by P&G’s country-based organisations

Early expansion
Principle set down by Vice President of overseas operations
Must tailor our products to meet consumer demand in each nation Must create local country subsidiaries whose structure, policies and practices are as exact a replica of the US P&G organisation as it is possible to create Built a portfolio of self-sufficient subsidiaries run by country general managers who grew their companies by adapting P&G technology and marketing expertise to their knowledge of local markets

1980s – 2 problems
1. Cost of running all the local product development labs and manufacturing plants was limiting profits 2. Ferocious autonomy of national subsidiaries was preventing the global rollout of new products and technology improvements Resistance due to negative impact on profits, for which the country subsidiaries were held accountable Consequence – regional headquarters became more active

i.e. Euro Technical teams were formed to eliminate needless country-by-country product differences, reduce duplicated development efforts and gain consensus on now-technology diffusion Profit responsibility remained with country subsidiaries

Late 80s early 90s
Move to category management structure
1989 first global category executives appointed
International division replaced with four regional entities – North America, Europe, Latin America and Asia- each assuming responsibility for profitability Impact – significant boost in P&Gs overseas growth

To many in P&G, the matrix structure seemed an impediment to entrepreneurship and flexibility

Jager – Japan General Manager – argued that without a major in-country product development capability, P&G could never respond to the demanding Japanese consumer and the tough, technology-driven local competitors Emphasis on expansion through more product introductions

Envisaged a technology centre that would support product development throughout Asia and even take a worldwide leadership role Consequence – P&G grew its 60-person R&D team into an organisation that could compete

1990 – Jager became group VP for Asia

Organisation 2005
1996 – Jager COO - Development of new products as key to future growth Became the champion of a Leadership Innovation Team to identify and support major companywide innovations

Superior product technology
If P&Gs growth would now depend on its ability to develop new products and roll them out rapidly worldwide, Jager believed his new strategic thrust had to be implemented through a radically different organisation

Culture
Slow, conformist and risk averse – stretch, innovation and speed Leadership Innovation Team implemented a global rollout of Dryel and Swiffer Impact – 18 months after entering the first test market they were on sales in US, Europe, Latin America and Asia

Processes...
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