Case Paper: P&G Japan: The SK-II Globalization Project
Hawaii Pacific University
Mr. Louis R. Collazo
April 8, 2012
SK-II’s success is not only prestige skin care product or advanced technology but also its marketing approach to build the new brand. P&G succeeded to connect between the core technology or product concept and local market. Through Japanese market among the world’s toughest competitors, P&G developed potential source of innovations. In addition, SK-II’s marketing strategy built a new approach, Market research, Concept, Packaging, Positioning, Communications strategy. It was a big challenge that P&G shifted from Mass marketing, such as Olay brand, to Class marketing. SK-II’s marketing strategy. The primary issue concerning the case is the transformation of "SK-II" from a local brand to a global brand. This case allows us to evaluate how companies can "internationalize" their brands, and the obstacles and issues that they face while addressing this issue. Until now, SK-II can be characterized as local product in Japan with a sizable regional customer base in Taiwan and Hong Kong. SK-II brand is positioned at the high- end of skin care and provides high margins for the P&G. To adopt Japanese independent sales style for skin-care, they were sold through special stores by well- trained beauty counselors. At first, to examine the underlying reasons behind the difference between Japanese and other corporate management, I sum up the significant reasons why P&G’s Japanese operation was a failure until 1984 as follows: 1. P&G did not take the time to determine the local needs based on the culture and common practices among Japanese customer. The product development was based on Western markets and it was assumed that it would streamline itself to other areas of the world. 2. Stagnation in innovation is a failure for almost any business. With technology always moving forward at a fast rate, it is imperative for all retail products to constantly put forth effort in research and development. R&D is one of P&G’s strong points, yet the mismanagement of the division led to complacency in the development work. Due to the lack of improvements and the time lost, it allowed other competitors to release superior products quickly and efficiently. This ultimately led to a significant decrease in market share for P&G. 3. The Japanese distribution system is complex and difficult to assimilate to. P&G did not research and strategize to form new efforts in distributing the products efficiently and take advantage of the benefits of the distribution system commonly used. Instead of fixing the problem, P&G turned towards reduced pricing which drove the distributors away and caused sales to drop. Corporate management methods and the actual managers at headquarters in US and EU have certainly won many achievements in the US and Europe and elsewhere. In many cases, however, Western managers and Western management teams are ill prepared to succeed in Japan. In many cases, like P&G, drastic changes in thinking and management methods and personal changes at headquarters would be necessary to succeed in Japan. However, there are not many Western companies, which act on this knowledge. In this case, there were two major changes that P&G implemented to improve its operations to increase its profitability. Firstly, P&G increased R&D budget and secondly, they restructured with a plan called Organization 2005. Organization 2005 dealt with corporate cultural changes in becoming less risk averse and more productive with use of time. They encouraged innovation and creative high risk decisions with new products at a rate of more than once a month. Process changes included compensation reform with greater incentives based on performance, stock options to all employees, streamlined administrative aspects of marketing, payroll, and budgets on a more...
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