SK-II is a high-end skin care product, which has proven to be a success in the highly selective and competitive Japanese cosmetics market. It fits in the Japanese environment nicely. For starters, the wealthy Japanese society gives P&G a large market to target. Also, the uniquely sophisticated habits of Japanese women means they are more likely to accept the more complicated procedure required by SK-II. SK II involves six to eight steps, which is more than the number of steps of any other skin care products used in the rest of the world (1, p.8). Overall strategy of the of the organization
Given this product’s success in Japan for 1999 ($150 million in sales), P&G is considering expanding its SK-II into a global brand. When doing this, management has to consider how the Japanese market compares to the other markets being proposed (China and Europe) as part of their international expansion. They should also do a thorough analysis of each of the markets being considered for this product, and an analysis of their competitors’ firm wide international strategy. Because the Japanese market is very different from these other markets, the same level of success cannot be guaranteed. This includes the distribution channel and the supporting industries, e.g., TV advertising is relatively cheaper in Japan than in Europe. Models and Theories
P&G’s International Business-Level Strategy.
Porter’s model suggests that international business-level strategies are usually grounded in one or more of these home-country factors (1, p. 274). Based on Porters model, the firm’s strategy, structure, rivalry and demand conditions seem to be significant for P&G’s international business-level strategy. Firm strategy, structure, and rivalry: SK-II is the result of the combined ingenuity of P&G’s most talented technologists from its worldwide labs, as well as the specific expertise from a Japanese group. This combination worked well because it reflected the best of P&G's consolidated R&D while catering specifically to the needs of the Japanese market (2, p. 8). Being a global company headquartered in the U.S. makes it easier for P&G to bring its global talent to its home-country so that it can improve its R&D capabilities and thus have a competitive advantage. Having a pre-existing global structure may also make it easier to adapt this product to the needs of those other countries where P&G does business. When considering expanding the SK-II market, this competitive advantage should be considered. Demand conditions. The initial product opportunity for SK-II came about from U.S / global demand for an improved facial cleansing product (2, p. 8). That spawned the creation of SK-II as well as other products developed to meet these needs. Because SK-II was developed in response to the demand conditions in Japan, it became a highly regarded cosmetics product and survived the ferocious competition in the Japanese market; thus proving to be a competitive advantage. Furthermore, having a certain amount of understanding of the emerging Asian economic powers, P&G realized that fashionable people in countries like Korea, Taiwan, Hong Kong, etc., closely follow the fashion trends in Japan. Therefore, by entering the Japanese market and securing a substantial level of market share, P&G could have also created further competitive advantage for entering those emerging Asian markets. This strategy may even prove true in the case of entering the Chinese market. However, one may argue that China is a poorer country, but the populations in Hong Kong, Taiwan and Singapore are basically ethnically Chinese. Therefore, their habits should be much closer than that between Japanese and Chinese. Hence, with the successful entry into the Hong Kong market, Taiwan markets can be used as a direct test of the level to which Chinese women will accept the demanding procedures of SK II (2, p.6)....